Abstract

http://ssrn.com/abstract=226391
 
 

References (38)



 
 

Citations (99)



 


 



The Profits to Insider Trading: a Performance-Evaluation Perspective


Leslie A. Jeng


Harvard Business School

Richard J. Zeckhauser


Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Andrew Metrick


Yale School of Management; National Bureau of Economic Research (NBER)

January 1999

NBER Working Paper No. w6913

Abstract:     
This paper estimates the profits to insiders when they trade their company's stock. We construct a rolling purchase portfolio' that holds all shares purchased by insiders over the previous year and an analogous sale portfolio' that holds all shares sold by insiders over the previous year. We then analyze the returns to these value-weighted portfolios using performance-evaluation methods. This approach allows us to study the returns to insider transactions beginning on the day after their execution, and is free of the statistical difficulties that plague event studies on long-horizon returns. Using a comprehensive sample of reported insider transactions from 1975 - 1996, we find that the purchase portfolio earns abnormal returns of about 40 basis points per month, with about one-sixth of these abnormal returns accruing within the first five days after the initial transaction, and one-third within the first month. The sale portfolio does not earn abnormal returns. Our portfolio-based approach also allows for straightforward decompositions of the purchase and sale portfolios by various characteristics. We find that the abnormal returns to insider trades in small firms are not significantly different from those in large firms, and that top executives do not earn higher abnormal returns than do other insiders.

Number of Pages in PDF File: 58

working papers series


Download This Paper

Date posted: June 12, 2000  

Suggested Citation

Jeng, Leslie A. and Zeckhauser, Richard J. and Metrick, Andrew, The Profits to Insider Trading: a Performance-Evaluation Perspective (January 1999). NBER Working Paper No. w6913. Available at SSRN: http://ssrn.com/abstract=226391

Contact Information

Leslie A. Jeng (Contact Author)
Harvard Business School ( email )
Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
Richard J. Zeckhauser
Harvard University - Harvard Kennedy School (HKS) ( email )
79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-384-9340 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-496-3783 (Fax)
Andrew Metrick
Yale School of Management ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
(203)-432-3069 (Phone)
HOME PAGE: http://mba.yale.edu/faculty/profiles/metrick.shtml

National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Feedback to SSRN


Paper statistics
Abstract Views: 2,038
Downloads: 90
Download Rank: 166,877
References:  38
Citations:  99

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.359 seconds