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Insider Trading Performance in the Taiwan Stock Market

Author

Listed:
  • Min-Hsien Chiang

    (Institute of International Business, National Cheng Kung University, Taiwan)

  • Long-Jainn Hwang

    (Department of International Business Management, Wu-Feng Institute of Technology, Taiwan)

  • Yui-Chi Wu

    (Institute of International Business, National Cheng Kung University, Taiwan)

Abstract

This paper investigates the performance of insider trading on the Taiwan Stock Exchange. In addition to a traditional single-factor model, the conditional Jensen's alpha approach proposed by Eckbo and Smith (1998) is employed as well. We also compare performances between mutual funds and insider portfolios. The empirical results show that insider trading does not gain any abnormal returns as found in previous studies, which is robust to weighting schemes and portfolio construction methods. Moreover, mutual funds weakly outperform insider portfolios, which leads to a conjecture that insiders may seek benefits of corporate control instead of short-term trading profits.

Suggested Citation

  • Min-Hsien Chiang & Long-Jainn Hwang & Yui-Chi Wu, 2004. "Insider Trading Performance in the Taiwan Stock Market," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 3(3), pages 239-256, December.
    • Handle: RePEc:ijb:journl:v:3:y:2004:i:3:p:239-256
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    References listed on IDEAS

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    Cited by:

    1. Brajesh Kumar & Ajay Pandey, 2011. "Price Discovery in emerging commodity markets: Spot and Futures relationship in indian commodity Futures market," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 25(1), pages 79-121.
    2. Chang, Chiao-Yi, 2013. "The market response of insider transferring trades and firm characteristics in Taiwan," Emerging Markets Review, Elsevier, vol. 16(C), pages 131-144.
    3. Foley, Sean & Kwan, Amy & McInish, Thomas H. & Philip, Richard, 2016. "Director discretion and insider trading profitability," Pacific-Basin Finance Journal, Elsevier, vol. 39(C), pages 28-43.
    4. Cagdas Tahaoglu & Z. Nuray Guner, 2011. "An Investigation Of Returns To Insider Transactions: Evidence From The Istanbul Stock Exchange," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 25(1), pages 57-77.
    5. Foley, Sean & Kwan, Amy & McInish, Thomas H. & Philip, Richard, 2017. "Reprint of Director discretion and insider trading profitability," Pacific-Basin Finance Journal, Elsevier, vol. 45(C), pages 52-67.

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    More about this item

    Keywords

    insider trading; generalized method of moments; Jensen's alpha;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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