Reprint of Director discretion and insider trading profitability
Abstract
Using a machine-learning algorithm, we classify over 60,000 director transactions into discretionary and non-discretionary purchases and sales based on the trading motive provided by the insider. We find that discretionary trades by company insiders are more informed than non-discretionary trades. Further, discretionary purchases generate higher abnormal returns (1) for larger purchases, or when the purchase is for (2) the stock of a smaller firm, or (3) a firm with greater information asymmetry.
Publication Title
Pacific Basin Finance Journal
Recommended Citation
Foley, S., Kwan, A., McInish, T., & Philip, R. (2017). Reprint of Director discretion and insider trading profitability. Pacific Basin Finance Journal, 45, 52-67. https://doi.org/10.1016/j.pacfin.2016.06.012
