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Do Investment Newsletters Move Markets?
Author(s) -
Brown Scott,
CaoAlvira Jose J.,
Powers Eric
Publication year - 2013
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12004
Subject(s) - insider , insider trading , commission , business , investment (military) , stock (firearms) , trade volume , monetary economics , stock market , finance , economics , international trade , politics , political science , law , mechanical engineering , paleontology , horse , biology , engineering
We analyze the market impact of stock recommendations made by a single investment newsletter that focuses on instances of heavy insider trading. The market reacts positively to the actual insider trades and the associated Form 4 Securities and Exchange Commission (SEC) filings that attracted the newsletter's interest. The subsequent recommendations, which occur within a delay of several days, are associated with an even larger announcement period return and higher trade volume. Thus, despite the fact that recommendations are largely based on publicly available information on insider trades and the reach of the newsletter is limited, the newsletter has a significant impact on the market.