Strategic insider trading and its consequences for outsiders: Evidence from the eighteenth century

Mathijs Cosemans and Rik Frehen

Journal of Financial Economics, 2025, vol. 164, issue C

Abstract: This paper uses hand-collected historical data to provide empirical evidence on the strategic trading behavior of insiders and its consequences for outsiders. Specifically, we collect all equity trades of all insiders and outsiders in an era without legal restrictions on insider trading and a market where trading is non-anonymous. We find that access to private information creates a significant gap between the post-trade returns of insiders and outsiders. Consistent with theory, insiders capitalize on their information advantage by hiding their identity and timing their trades. Both experienced and inexperienced outsiders face expected losses due to this strategic insider trading.

Keywords: Insider trading; Financial history; Asymmetric information (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:164:y:2025:i:c:s0304405x24001971

DOI: 10.1016/j.jfineco.2024.103974

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