The Conditional Performance of Insider Trades

Eckbo, B. Espen; Smith, David C.

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The Conditional Performance of Insider Trades

Journal of Finance, Vol. 53, pp. 467-498, 1998

Tuck School of Business Working Paper

51 Pages Posted: 23 Jul 1998 Last revised: 27 Oct 2008

See all articles by B. Espen Eckbo

B. Espen Eckbo

Tuck School of Business at Dartmouth; European Corporate Governance Institute (ECGI)

David C. Smith

University of Virginia - McIntire School of Commerce

Abstract

This paper estimates the performance of insider trades on the closely held Oslo Stock Exchange (OSE) during a period of lax enforcement of insider trading regulations. Our data permits construction of a portfolio that tracks all movements of insiders in and out of the OSE firms. Using three alternative performance estimators in a time-varying expected return setting, we document zero or negative abnormal performance by insiders. The results are robust to a variety of trade characteristics. Applying the performance measures to mutual funds on the OSE, we also document some evidence that the average mutual fund outperforms the insider portfolio.

JEL Classification: G12, G14

Suggested Citation: Suggested Citation

Eckbo, B. Espen and Smith, David Carl, The Conditional Performance of Insider Trades. Journal of Finance, Vol. 53, pp. 467-498, 1998, Tuck School of Business Working Paper, Available at SSRN: https://ssrn.com/abstract=98727