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Insider Investment Horizon
Author(s) -
AKBAS FERHAT,
JIANG CHAO,
KOCH PAUL D.
Publication year - 2020
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.12878
Subject(s) - insider , horizon , insider trading , investment (military) , stock (firearms) , conjecture , financial economics , economics , monetary economics , jump , business , microeconomics , finance , mathematics , engineering , political science , combinatorics , law , mechanical engineering , physics , geometry , quantum mechanics , politics
We examine the relation between insiders’ investment horizon and the information content of their trades with respect to future stock returns. We conjecture that an insider's investment horizon establishes a benchmark for expected patterns of continued trading behavior and thus helps identify unexpected insider trades, which should be more informative in efficient markets. Consistent with this conjecture, the trades of short‐horizon insiders are both more unexpected and more informed, on average, than those of long‐horizon insiders. Short‐horizon insiders and their firms also tend to display characteristics that are associated with a greater focus on short‐termism.