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Trading Skill: Evidence from Trades of Corporate Insiders in Their Personal Portfolios

Author

Listed:
  • Ben-David, Itzhak

    (Ohio State University)

  • Birru, Justin

    (Ohio State University)

  • Rossi, Andrea

    (Ohio State University)

Abstract

We study trading patterns of corporate insiders in their own personal portfolios. To do so, we identify accounts of corporate insiders in a large dataset provided by a retail discount broker. We show that insiders overweight firms from their own industry. Furthermore, insiders earn substantial abnormal returns only on stocks from their industry, especially obscure stocks (small, low analyst coverage, high volatility). In a battery of tests, we find no evidence that corporate insiders use private information and conclude that insiders have an informational advantage in trading stocks from their own industry over outsiders to the industry.

Suggested Citation

  • Ben-David, Itzhak & Birru, Justin & Rossi, Andrea, 2016. "Trading Skill: Evidence from Trades of Corporate Insiders in Their Personal Portfolios," Working Paper Series 2016-08, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2016-08
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    Cited by:

    1. Ben-David, Itzhak & Birru, Justin & Prokopenya, Viktor, 2015. "Uninformative Feedback and Risk Taking: Evidence from Retail Forex Trading," Working Paper Series 2014-17, Ohio State University, Charles A. Dice Center for Research in Financial Economics.

    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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