Informed Margin Trading: Empirical Evidence from Margin Trading Activists

10 Pages Posted: 8 Mar 2020 Last revised: 16 Apr 2020

See all articles by Manuel Almagro

Manuel Almagro

Karlsruhe Institute of Technology

Jan-Oliver Strych

Karlsruhe Institute of Technology - Institute for Finance

Date Written: April 15, 2020

Abstract

Studies such as Hardouvelis and Theodossiou (2002) indicate that margin traders are not informed investors on average. We examine a subgroup of margin trading investors: Margin trading activists. These are shareholders identified by Schedule 13D filings that state therein to use margin borrowings to finance their holdings. We find that arrivals of margin trading activists are associated with positive target announcement returns compared to arrivals of non-margin trading activists. We also find that ex ante dividend paying targets increase their peer group adjusted dividend yields after margin trading activists’ arrivals. Our findings indicate that margin trading activists are informed.

Keywords: Margin Trading, Activist Investor, Schedule 13D, Dividend Policy

JEL Classification: G23, G32, G34, G35

Suggested Citation

Almagro, Manuel and Strych, Jan-Oliver, Informed Margin Trading: Empirical Evidence from Margin Trading Activists (April 15, 2020). Available at SSRN: https://ssrn.com/abstract=3535856 or http://dx.doi.org/10.2139/ssrn.3535856

Manuel Almagro

Karlsruhe Institute of Technology ( email )

Kaiserstraße 12
Karlsruhe, Baden Württemberg 76131
Germany

Jan-Oliver Strych (Contact Author)

Karlsruhe Institute of Technology - Institute for Finance ( email )

Kaiserstraße 12
Karlsruhe, Baden Württemberg 76131
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
29
Abstract Views
343
PlumX Metrics