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The Conditional Performance of Insider Trades

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Author Info
B. Espen Eckbo (Stockholm School of Economics and the Norwegian School of Economics and Business Administration,)
David C. Smith (Norwegian School of Management)

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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 permit 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. Copyright The American Finance Association 1998.

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Publisher Info
Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 53 (1998)
Issue (Month): 2 (04)
Pages: 467-498
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Handle: RePEc:bla:jfinan:v:53:y:1998:i:2:p:467-498

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  2. Steven Ongena & David C. Smith & Dag Michalsen, 2000. "Firms and their distressed banks: lessons from the Norwegian banking crisis (1988-1991)," International Finance Discussion Papers 686, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  3. Esther Brio & Javier Perote, 2007. "What Enhances Insider Trading Profitability?," Atlantic Economic Journal, International Atlantic Economic Society, vol. 35(2), pages 173-188, June. [Downloadable!] (restricted)
  4. Hans Degryse & Frank de Jong & Jérémie Lefebvre, 2009. "An Empirical Analysis of Legal Insider Trading in the Netherlands," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  5. Kyri Kyriacou & Bryan Mase, 2004. "Executive Stock Option Exercises and the Predictive Ability of Transaction Value," Public Policy Discussion Papers 04-09, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
  6. Eckbo, B. Espen & Norli, Øyvind, 2004. "The choice of seasoned-equity selling mechanism: Theory and evidence," Discussion Papers 2004/17, Department of Finance and Management Science, Norwegian School of Economics and Business Administration. [Downloadable!]
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  7. Kyriacos Kyriacou & Bryan Mase, 2003. "The Information Contained In The Exercise Of Executive Stock Options," Economics and Finance Discussion Papers 03-17, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
  8. Kyri Kyriacou & Bryan Mase, 2004. "Executive Stock Option Exercises and the Predictive Ability of Transaction Value," Economics and Finance Discussion Papers 04-09, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
  9. Leslie A. Jeng & Andrew Metrick & Richard Zeckhauser, 1999. "The Profits to Insider Trading: A Performance-Evaluation Perspective," NBER Working Papers 6913, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Charles P. Thomas & Francis E. Warnock & Jon Wongswan, 2004. "The performance of international portfolios," International Finance Discussion Papers 817, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  11. Nadia Linciano, 2003. "The Effectiveness of Insider Trading Regulation in Italy. Evidence from Stock-Price Run-Ups Around Announcements of Corporate Control Transactions," European Journal of Law and Economics, Springer, vol. 16(2), pages 199-218, September. [Downloadable!] (restricted)
  12. Michael Firth & T. Y. Leung & Oliver M. Rui, 2009. "Insider Trading in Hong Kong: Tests of Stock Returns and Trading Frequency," Working Papers 042009, Hong Kong Institute for Monetary Research. [Downloadable!]
  13. Charles P. Thomas, 2006. "The Performance of International Equity Portfolios," The Institute for International Integration Studies Discussion Paper Series iiisdp162, IIIS. [Downloadable!]
  14. Leslie A. Jeng & Andrew Metrick & Richard Zeckhauser, . "Estimating the Returns to Insider Trading," Rodney L. White Center for Financial Research Working Papers 19-99, Wharton School Rodney L. White Center for Financial Research. [Downloadable!]
  15. Enrichetta Ravina & Paola Sapienza, 2006. "What Do Independent Directors Know? Evidence from Their Trading," NBER Working Papers 12765, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Ognedal,T., 2001. "Should the standard of evidence be lowered to reduce crime?," Memorandum 32/2001, Oslo University, Department of Economics. [Downloadable!]
  17. Naes, Randi & Ødegaard, Bernt Arne, 2009. "Liquidity and Asset Pricing: Evidence on the Role of Investor Holding Period," UiS Working Papers in Economics and Finance 2009/19, University of Stavanger. [Downloadable!]
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  18. Kyriacos Kyriacou & Bryan Mase, 2003. "The Information Contained In The Exercise Of Executive Stock Options," Public Policy Discussion Papers 03-17, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
  19. Wayne Ferson & Kenneth Khang, 2002. "Conditional Performance Measurement Using Portfolio Weights: Evidence for Pension Funds," NBER Working Papers 8790, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  20. Erasmo Giambona & Joseph Golec & Carmelo Giaccotto, 2006. "The Conditional Performance of REIT Stock Repurchases," The Journal of Real Estate Finance and Economics, Springer, vol. 32(2), pages 129-149, March. [Downloadable!] (restricted)
  21. Charles P. Thomas & Francis E. Warnock & Jon Wongswan, 2006. "The Performance of International Equity Portfolios," NBER Working Papers 12346, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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