An empirical analysis of corporate insiders' trading performance

摘要

Purpose-The purpose of this paper is to conduct an empirical analysis of the trading performance of US corporate insiders.Design/methodology/approach-Based on the volume weighted average price (VWAP),the authors propose a metric to measure the trading performance of US corporate insiders:trading alpha.This metric is clean of the contamination effect from insiders' own trades.The authors apply this metric to examine whether insiders can beat the market when they trade.Findings-It is found that corporate insiders achieve positive trading alpha on both purchases and sales of stocks on average.The existence of a positive trading alpha is robust to controlling for firm,trading and insider characteristics.More importantly,evidence is found for the persistence in corporate insiders' trading performance.Those insiders who traded well in the past continue to trade well over time.Those who well execute in purchases of stocks also perform well in sales.Originality/value-This paper extends the notion of beating the market from the investment profession to the trading profession.Skyrocketing corporate insider trades provide a natural setting under which to examine the trading performance.The findings that:insiders can beat the market on average when they trade;and there exists persistence in the insiders' trading performance over time and along trading directions are novel and new to the literature.This paper also has bearing on how to evaluate professional traders.