Executive Gender and Prospect-Value Bias: Evidence from Insider Trading

44 Pages Posted: 26 Jun 2019

See all articles by Saba Sehrish

Saba Sehrish

Massey University, New Zealand

David K. Ding

Singapore Management University - Lee Kong Chian School of Business

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance

Date Written: June 18, 2019

Abstract

This study shows that prospect value influences insider-trading decisions, and the impact is stronger among female executives’ trades. Insiders who buy (sell) when their company's prospect value is above (below) other firms’ prospect values lose 34 (12) basis points over the next month. Female insider trades, as compared with trades by their male counterparts, are affected more by prospect-value bias, and they suffer significantly higher resultant losses. While the findings contradict the overconfidence hypothesis that predicts poor trading decisions by male insiders, the results are consistent with the male insiders’ superior information access hypothesis, suggesting that behavioral biases diminish with knowledge.

Keywords: executive gender, insider trading, prospect theory value, biased trades’ loss, access to information

JEL Classification: G11, G4

Suggested Citation

Sehrish, Saba and Ding, David K. and Visaltanachoti, Nuttawat, Executive Gender and Prospect-Value Bias: Evidence from Insider Trading (June 18, 2019). Available at SSRN: https://ssrn.com/abstract=3406357 or http://dx.doi.org/10.2139/ssrn.3406357

Saba Sehrish (Contact Author)

Massey University, New Zealand ( email )

East Precinct, Dairy Flat Highway (SH17),0632
Auckland, 0632
New Zealand

David K. Ding

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore, 178899
Singapore
+65 6828-0245 (Phone)

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance ( email )

School of Economics and Finance
Private Bag 102904, NSMC
Auckland
New Zealand
64 9 414 0800 (43169) (Phone)
64 9 441 8177 (Fax)

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