Personal Trading by Brokers, Analysts, and Fund Managers

Abstract

When brokers, analysts and fund managers buy or sell for their own account, they outperform retail investors over short windows up to a month. They earn particularly high abnormal returns when they trade simultaneously with other financial experts and when they trade before earnings announcements, revisions of analyst recommendations, and unexpected large price changes. We also find evidence consistent with front running and information leakage before the public disclosure of corporate insider trades, the execution of block trades by foreign and domestic institutions, and revisions of recommendations by analysts working at the same brokerage firm as the expert trading.

Keywords: informed trading, information asymmetry, leakage, front running, tipping, insider trades, block trades, social networks, broker, analyst, fund manager, institutional investor

JEL Classification: G12, G14, G18