Synthesizing Information-Driven Insider Trade Signals
88 Pages Posted: 21 Aug 2023
Date Written: August 15, 2023
We propose a simple approach to synthesize presumably information-driven insider trading signals for the cross-section of stocks. We find that the resulting composite strategy can predict returns, predominantly in equal-weighted portfolios, in our global sample. The results indicate that the benefits of our composite strategy reflect a short-term informational advantage of insiders. Finally, cross-country analysis reveals that varying insider trading restrictions between countries have limited explanatory power for the benefits of the composite strategy.
Keywords: Informed trading, insider trading, return predictability, global stock markets
JEL Classification: G12, G14
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