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Do Informed Traders Win? An Analysis of Changes in Corporate Ownership around Substantial Shareholder Notices *
Author(s) -
DA SILVA ROSA RAYMOND,
SAVERIMUTTU NIRMAL,
WALTER TERRY
Publication year - 2005
Publication title -
international review of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.489
H-Index - 18
eISSN - 1468-2443
pISSN - 1369-412X
DOI - 10.1111/j.1468-2443.2006.00053.x
Subject(s) - asset (computer security) , anticipation (artificial intelligence) , shareholder , business , register (sociolinguistics) , institutional investor , value (mathematics) , share price , monetary economics , microeconomics , economics , financial economics , finance , corporate governance , linguistics , philosophy , computer security , artificial intelligence , machine learning , computer science , stock exchange
The financial economics literature typically distinguishes between two classes of investors, namely ‘informed’ and ‘uninformed’ traders. Informed traders are those who possess some fundamental information about the true value of an asset, which is not readily available to other traders. Presuming that this information advantage is obtained from costly information search there is a general assumption that these traders realize superior returns. Unlike previous researchers, we access a unique panel of institutional and retail ownership (Clearing House Electronic Subregister System, CHESS records) that enable us to develop powerful measures that capture and benchmark abnormal changes in the share register across a number of dimensions. We find some evidence of a positive and significant relationship between the level of informed trading in the share register and abnormal market performance. However, our results suggest that informed traders move in and out of the share register in response to abnormal market performance, rather than in anticipation of abnormal market performance.