Are the Insider Trades of a Large Institutional Investor Informed?
Joseph H. Golec
University of Connecticut - Department of Finance
Financial Review, Vol. 42, No. 2, pp. 161-190, May 2007
We use a unique data set to consider whether a large institution's (Fidelity funds) insider trades are informed. Theoretical studies of large informed traders suggest that their information advantage could be greater for buy trades than sell trades, be short- or long-lived, and be exploited by varying the pace of trade execution. Although there is evidence of each of these, Fidelity seems to be informed only for quickly executed buy trades. Other trades outperform a stock market index but not a four-factor return model. This performance profile is consistent with Fidelity's fees, which depend on performance compared to an index.
Number of Pages in PDF File: 30Accepted Paper Series
Date posted: June 4, 2007
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