Reprint of Director discretion and insider trading profitability

Sean Foley, Amy Kwan, Thomas McInish () and Richard Philip

Pacific-Basin Finance Journal, 2017, vol. 45, issue C, 52-67

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.

Keywords: Insider trading; Director discretion (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:45:y:2017:i:c:p:52-67

DOI: 10.1016/j.pacfin.2016.06.012

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