Investment Intelligence from Insider Trading
- 7h 8m
- H. Nejat Seyhun
- The MIT Press
- 1998
The term insider trading refers to the legal stock transactions of the officers, directors, and large shareholders of a firm. Many investors believe that corporate insiders, informed about their firms' prospects, buy and sell their own firm's stock at favorable times, reaping significant profits. The key question for stock market investors is whether publicly available insider-trading information can help them to outperform a simple passive index fund.
Basing his insights on an exhaustive data set that captures information on all reported insider trading in all publicly held firms over a period of twenty-one years--over one million transactions!--H. Nejat Seyhun shows how investors can use insider information to their advantage. He documents the magnitude and duration of the stock price movements following insider trading, determinants of insiders' profits, and the risks associated with imitating insider trading. He looks at the likely performance of individual firms and of the overall stock market, and compares the value of what one can learn from insider trading with commonly used measures of value such as price-earnings ratio, book-to-market ratio, and dividend yield.
About the Author
H. Nejat Seyhun is Jerome B. and Eilene M. York Professor of Business Administration at the University of Michigan Business School.
In this Book
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Insider-trading patterns
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Does insider trading predict future stock returns?
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A stock-picking strategy
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Predicting future market returns
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Crash of October 1987 and insider trading
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Dividend yields and insider trading
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Dividend Initiations
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Earnings announcements
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Price-earnings ratio
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Book-to-market ratio
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Insider trading in target firms
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Insider trading in bidder firms
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Momentum and mean reversion
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Implementation and conclusions
