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Are the Insider Trades of a Large Institutional Investor Informed?

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  • Joseph Golec

Abstract

We use a unique data set to consider whether a large institution's (Fidelity funds) insider trades are informed. Theoretical studies of large informed traders suggest that their information advantage could be greater for buy trades than sell trades, be short‐ or long‐lived, and be exploited by varying the pace of trade execution. Although there is evidence of each of these, Fidelity seems to be informed only for quickly executed buy trades. Other trades outperform a stock market index but not a four‐factor return model. This performance profile is consistent with Fidelity's fees, which depend on performance compared to an index.

Suggested Citation

  • Joseph Golec, 2007. "Are the Insider Trades of a Large Institutional Investor Informed?," The Financial Review, Eastern Finance Association, vol. 42(2), pages 161-190, May.
    • Handle: RePEc:bla:finrev:v:42:y:2007:i:2:p:161-190
    DOI: 10.1111/j.1540-6288.2007.00166.x
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    Cited by:

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    2. Jagjeev Dosanjh, 2017. "Exchange Initiatives and Market Efficiency: Evidence from the Australian Securities Exchange," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2017, January-A.
    3. repec:uts:finphd:34 is not listed on IDEAS

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