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Are the Insider Trades of a Large Institutional Investor Informed?

30 Pages Posted: 4 Jun 2007  

Joseph H. Golec

University of Connecticut - Department of Finance

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Abstract

We use a unique data set to consider whether a large institution's (Fidelity funds) insider trades are informed. Theoretical studies of large informed traders suggest that their information advantage could be greater for buy trades than sell trades, be short- or long-lived, and be exploited by varying the pace of trade execution. Although there is evidence of each of these, Fidelity seems to be informed only for quickly executed buy trades. Other trades outperform a stock market index but not a four-factor return model. This performance profile is consistent with Fidelity's fees, which depend on performance compared to an index.

Suggested Citation

Golec, Joseph H., Are the Insider Trades of a Large Institutional Investor Informed?. Financial Review, Vol. 42, No. 2, pp. 161-190, May 2007. Available at SSRN: https://ssrn.com/abstract=990901 or http://dx.doi.org/10.1111/j.1540-6288.2007.00166.x

Joseph Golec (Contact Author)

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

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