Some Insiders are Indeed Smart Investors

21 Pages Posted: 16 Jul 2008 Last revised: 31 Jul 2008

See all articles by Daniel Giamouridis

Daniel Giamouridis

Bank of America - Bank of America Merrill Lynch; Athens University of Economics and Business; City University London - Cass Business School - Faculty of Finance; EDHEC Risk Institute

Manolis Liodakis

Citigroup, Inc.

Andy Moniz

Deutsche Bank AG (London)

Date Written: July 29, 2008

Abstract

Not all insiders are the same; some are more effective than others in processing the information they have access to, and invest their own wealth accordingly. We used a database with transactions from the U.K. market to identify insiders with superior market timing abilities. For the period 1994 to 2006 we showed that informative insider trades can be identified ex-ante through certain characteristics of the transactions and the firm itself. Moreover we showed how outsiders could benefit from this information. We created a long-only portfolio strategy that generated an economically and statistically significant return. In addition, we showed that the insider transactions signal can be used to construct a satellite strategy that enhances the returns of a typical quant investment portfolio.

Suggested Citation

Giamouridis, Daniel and Liodakis, Manolis and Moniz, Andy, Some Insiders are Indeed Smart Investors (July 29, 2008). Available at SSRN: https://ssrn.com/abstract=1160305 or http://dx.doi.org/10.2139/ssrn.1160305

Daniel Giamouridis

Bank of America - Bank of America Merrill Lynch ( email )

United Kingdom

Athens University of Economics and Business ( email )

Department of Accounting and Finance
Greece

City University London - Cass Business School - Faculty of Finance ( email )

London, EC2Y 8HB
Great Britain

EDHEC Risk Institute ( email )

Lille
France

Manolis Liodakis (Contact Author)

Citigroup, Inc. ( email )

399 Park Avenue
New York, NY 10043
United States

Andy Moniz

Deutsche Bank AG (London) ( email )

Winchester House
1 Great Winchester Street
London, EC2N 2DB
United Kingdom

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