Work

Estimating the Returns to Insider Trading: A Performance-Evaluation Perspective

Year: 2003

Type: article

Abstract: This paper uses performance-evaluation methodology to estimate the returns earned by insiders when they trade their company's stock. Our methods are designed to estimate the returns earned by insiders themselves and thereby differ from the previous insider-trading literature, which focuses on the informativeness of insider trades for other investors. We find that insider purchases earn abnormal returns of more than 6% per year, and insider sales do not earn significant abnormal returns. We compute that the expected costs of insider trading to noninsiders are about 10 cents for a $10,000 transaction.

Source: The Review of Economics and Statistics

DOI: 10.1162/003465303765299936

Authors: Leslie A. Jeng, Andrew Metrick, Richard Zeckhauser

Institutions: Boston University, University of Pennsylvania, National Bureau of Economic Research, Harvard University

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3124198244

FWCI: 18.87

Cites: 58

Cited by: 567

Related to: 10