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Corporate Transactions in Hard-to-Value Stocks

Author

Listed:
  • Ben-David, Itzhak

    (Ohio State University and NBER)

  • Kim, Byungwook

    (Ohio State University)

  • Moussawi, Hala

    (Stanford Graduate School of Business)

  • Roulstone, Darren T.

    (Ohio State University)

Abstract

Hard-to-value stocks provide opportunities for managers to exploit their informational advantage through trading on their firms' and their own personal accounts. In contrast to the prediction that such transactions reflect private information about future events, they are contrarian and heavily depend on past returns. Corporate transactions in hard-to-value stocks outperform those in easy-to-value stocks in the early part of our sample, but this difference disappears after 2002, coinciding with a general decline in the profitability of stock market anomalies. Our evidence is consistent with managers' perception of mispricing, rather than private information, being a key motivator of their transactions.

Suggested Citation

  • Ben-David, Itzhak & Kim, Byungwook & Moussawi, Hala & Roulstone, Darren T., 2021. "Corporate Transactions in Hard-to-Value Stocks," Working Paper Series 2021-16, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2021-16
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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • 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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