An Investigation of Returns to Insider Transactions: Evidence from the Istanbul Stock Exchange (original) (raw)
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The Conditional Performance of Insider Trades
The Journal of Finance, 1998
This paper estimates the performance of insider trades on the closely held Oslo Stock Exchange (OSE) during a period of lax enforcement of insider trading regulations. Our data permit construction of a portfolio that tracks all movements of insiders in and out of the OSE firms. Using three alternative performance estimators in a time-varying expected return setting, we document zero or negative abnormal performance by insiders. The results are robust to a variety of trade characteristics. Applying the performance measures to mutual funds on the OSE, we also document some evidence that the average mutual fund outperforms the insider portfolio. CORPORATE INSIDERS, I.E., INDIVIDUALS closely related to the firm either through direct employment or through participation on supervisory committees and boards, will from time to time possess information about the firm's future cash f low which is not yet ref lected in the firm's stock price. Insiders who trade on the basis of such information tend to purchase stocks just prior to abnormal price increases and to sell just prior to abnormal price declines. Employing traditional event-study techniques, in which equal-weighted average abnormal stock returns are estimated over a fixed time period following insider trades, the extant empirical literature tends to support this "buy low and sell high" hypothesis. For example, Jaffe (1974) and Seyhun (1986) present evidence of significant abnormal stock returns following reported insider trades on the New York and the American Stock Exchanges. Similarly, Baesel and Stein (1979) and Fowler and Rorke (1984) conclude that insiders on the Toronto Stock Exchange earn abnormal profits, and Pope, Morris, and Peel (1990) reach a similar conclusion for firms in the United Kingdom.
Insiders' profits, costs of trading, and market efficiency
Journal of Financial Economics, 1986
This study investigates the anomalous findings of the previous insider trading studies that any investor can earn abnormal profits by reading the Ofi&/ Summan/. Availability of abnormal profits to insiders, availability of abnormal profits to outsiders who imitate insiders. determinants of insiders' predictive ability, and effect of insider trading on costs of trading for other investors are examined by using approximately 60,000 insider sale and purchase transactions from 1975 to 1981. Implications for market efficiency and evaluation of abnormal profits to active trading strategies are discussed.
The Profitability of Insider Trades in the Dutch Stock Market
SSRN Electronic Journal, 2000
This study examines the profitability of insider trading on Euronext Amsterdam. To improve market transparency, disclosure of insider trading has been required in the Netherlands since April 1999. Both a short-term event study and a 6-month buy-and-hold strategy revealed that insiders as well as outsiders mirroring insiders are able to realize abnormal returns. We report outperformances for insider purchase portfolios of between 8.9% and 9.3% over 6 months, after correcting for possible size and value/growth effects in our sample. A CAPM check showed our results to be robust.
Pacific-Basin Finance Journal, 2013
This study proposes a simple framework to disentangle insiders' opportunistic trade from liquidity trade. An opportunistic trade occurs when the probability of informed trading and the speed of convergence to market efficiency increase in a month of an insider transaction. Using Thailand Securities Exchange Commission (SEC) insider filing reports during 2002 to 2008 we find an average insider achieves merely 0.64% and 0.32% in a month after an insider purchase and sell but an opportunistic portfolio yields approximately 2%.
An Overview of Insider Trading in Borsa Istanbul
Journal of Research in Economics, 2019
W e analyze insider trading patterns in firms listed in Borsa Istanbul using a unique and most comprehensive regulatory dataset for the first time. The dataset provided by Turkey’s Central Securities Depository contains the number and volume of insiders’ buy and sell transactions during the period 2009 – 2015. We observe that (i) corporate insiders are active traders in Turkish stock market, (ii) the trading patterns vary across different sized firms, and finally, (iii) insiders at different positions trade differently. This study enhances understanding of insider trading behavior in an emerging market. Furthermore, our results have important implications for regulatory authorities who are responsible to maintain well-functioning financial markets which will facilitate increased prosperity and economic growth.
Public Disclosure and Dissimulation of Insider Trades
Econometrica, 2001
Regulation requiring insiders to publicly disclose their stock trades after the fact complicates the trading decisions of informed, rent-seeking insiders. Given this requirement, we present an insider's equilibrium trading strategy in a multiperiod rational expectations framework. Relative to Kyle (1985), price discovery is accelerated and insider profits are lower. The strategy balances immediate profits from informed trades against the reduction in future profits following trade disclosure and, hence, revelation of some of the insider's information. Our results offer a novel rationale for contrarian trading: dissimulation, a phenomenom distinct from manipulation, may underlie insiders' trading decisions.
Is Insider Trading Successful? An Extensive Analysis with Buying and Selling Evidence
Proceedings of the 15th Economics & Finance Conference, Prague, 2021
Purpose: The goal of the present study is to first, understand the market timing capabilities of a set of internal stakeholders while trading (buying and selling) stock, and second, shed some light on some of the characteristics that make them (or not) successful. Design/methodology/approach: We use a relative transaction price approach (RTP) on 842 aggregated trades coming from insiders. These were taken from publicly disclosed information available on the Portuguese regulator. Furthermore, we use a median regression-based method to infer on our conclusions. Findings: We find that insiders buy (sell) at a relatively lower (higher) price when compared to other traders. This shows signs of market timing capabilities. Furthermore, from the studied characteristics, neither the frequency nor gender are good predictors for performance, but the seniority in the organization can help us to understand that some insiders, mostly on the managerial level, might have an edge. Overall, we also find that insiders' trades made OTC generally overperform the ones made on the open market. At last, we find that insiders did not lose any performance during the Portuguese bailout period. Originality/value: By using a thorough analytical approach and a never-used sample of trading data, comprising both buying and selling trades at high-frequency (daily) level, we build on the literature of insider trading as well as on the knowledge around the effects of trading on the open market vs. OTC. We also make yet another contribute towards the literature around the Portuguese bailout effect.
Impact of the Secondary Insider Trading on Financial Markets
Acta Physica Polonica A, 2018
The insider trading phenomenon is based on the situation when traders use material information not publicly available to make their investment decisions. In most countries of the world, insider trading is illegal and is punishable by ne or imprisonment. Insider trading has many economic eects, which in the light of available scientic research can be both positive and negative. Insider traders can be divided into primary and secondary traders depending on whether their contact with insider information is direct or indirect. Primary insider trading has been discussed in many research studies and scientic descriptions, while secondary insider trading has not been investigated yet. This paper's aim is to ll this gap. Since the empirical data for secondary insider trading is in practice impossible to obtain, the research analysis is based on simulations of two probabilistic models. The rst one concerns the use of insider information for an innite long period of time after its acquisition, while the second one on the day of its receipt. The results of the simulation are related to three basic models of nancial market functioning: the ecient market hypothesis, the fractal market hypothesis, and the coherent market hypothesis.
Insider Trading, Informativeness, and Price Efficiency Around the World
Asia-Pacific Journal of Financial Studies, 2019
This paper provides the first direct evidence of the impact of enforcing insider regulations on the informativeness of insider trades and stock price efficiency across 44 countries with varying levels of insider trading regulations. Results suggest that insider purchases earn abnormal profits, especially in countries with active enforcement of insider trading regulations. We further show that while insiders trade less before earnings announcements in countries with active enforcement, their stock prices react more to earnings news than those in countries without active enforcement. Overall, our results support the view that effective insider trading regulation promotes price efficiency.
Modelling the information content in insider trades in the Singapore exchange
Mathematics and Computers in Simulation, 2005
Over the past decade, numerous studies have debated the usefulness of insider trading. One particularly important study relates to the informational role that insiders' transaction volumes have on trading activity in the equity market. In our paper, we examine whether insiders' purchases (sales) indicate positive (negative) earnings announcements. We argue that if insiders have early access to publicly announced information, then the issuance of good (bad) news should be preceded by insider buying (selling) activities. The results reveal that insiders' trading volume play an important role in the dissemination of private information to the investing public. In particular, insiders' purchases (sales) are found to be a good indication of good (bad) news. The information content in insiders' trades may be exploited, provided investors are able to realize returns within one, and at most two months, after the announcement date.