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Mimicking insider trades

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  • Neupane, Biwesh
  • Thapa, Chandra
  • Marshall, Andrew
  • Neupane, Suman

Abstract

We examine whether outside investors mimic insider trades by analyzing the daily transactions of foreign institutional investors (FII) in the Indian emerging market. We find that the value relevance of insiders' opportunistic buy trades is much higher in our context relative to that reported for developed markets. More importantly, we find that FII mimic opportunistic buy trades, which is more pronounced for firms that are informationally more opaque or have lower corporate governance quality. A long-short strategy based on FII's transactions after opportunistic trades generates an additional abnormal return of approximately 29% annually, compared to transactions based on routines trades.

Suggested Citation

  • Neupane, Biwesh & Thapa, Chandra & Marshall, Andrew & Neupane, Suman, 2021. "Mimicking insider trades," Journal of Corporate Finance, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:corfin:v:68:y:2021:i:c:s0929119921000614
    DOI: 10.1016/j.jcorpfin.2021.101940
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    More about this item

    Keywords

    Foreign institutional investors; Information asymmetry; Mimicking; Opportunistic insider trades; Routine insider trades;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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