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.
Original language | English |
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Pages (from-to) | 28-43 |
Number of pages | 16 |
Journal | Pacific-Basin Finance Journal |
Volume | 39 |
DOIs | |
Publication status | Published - Sept 2016 |
Externally published | Yes |
Keywords
- Insider trading
- Director discretion