Identifying Informative Insider Trades and Abnormal Returns through Fundamental Analysis

2007 ◽  
Author(s):  
Dain C. Donelson
Keyword(s):  
Abnormal Returns ◽  
Fundamental Analysis ◽  
Insider Trades

scholarly journals Abnormal Returns and Fundamental Analysis in Institutional Investors’ Decision-making: An Agency Theory Approach

2018 ◽  
Vol 11 (2) ◽  
pp. 55
Author(s):  
Mario Mustilli ◽  
Francesco Campanella ◽  
Eugenio D’Angelo
Keyword(s):  
Institutional Investors ◽  
Abnormal Returns ◽  
Computer Assisted ◽  
Fundamental Analysis ◽  
Theory Approach ◽  
Investment Policies ◽  
Agency Relationship ◽  
Telephone Interviews ◽  
Thomson Reuters ◽  
Conceptual Explanation

The purpose of this paper is to investigate the abnormal returns achieved by institutional investors. Distinguishing between institutional investors operating with a specific mandate to invest and those that operate their own choices independently from such a specific delegation, we show that the former achieve higher abnormal returns than the latter. The conceptual explanation of this result is attributable to the use of the fundamental analysis that the first type of institutional investors realized in a higher and more effective way than the second. This different approach in selecting securities might be due to the relationship between the institutional investor and the savers who provided capital. This different agency relationship might have been reflected in the institutional investor's investment policies through the agent behaviour, which changes depending on the nature of the principal who has given the mandate. The empirical analysis has been conducted on a sample of 5,500 institutional investors operating all around the world in 2014, drawing data from institutional investor's annual report, from their investment relations and from Bloomberg, Thomson Reuters, Bankscope, Eurostat and through Computer Assisted Telephone Interviews.

scholarly journals Are insider trades profitable? Evidence from directors’ trade on the Australian stock exchange

2008 ◽  
Vol 5 (3) ◽  
pp. 176-187 ◽  
Author(s):  
Bradley J. Neill ◽  
Mehdi Sadeghi ◽  
Edward Watts
Keyword(s):  
Firm Size ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Reversal Effect ◽  
Price Reversal ◽  
Insider Trades ◽  
Transaction Value ◽  
Research Director

This paper argues that directors earning statistically significantly abnormal returns from trades within their own companies. Evidence is provided through the analysis of 8,053 transactions by directors on the Australian Stock Exchange during the period of January 2002 to April 2006. Specifically this paper finds directors’ sales to be more profitable than purchases, contrary to much of the existing US and UK research. Director sales exhibit a price reversal effect, in that positive abnormal returns are earned prior to the sale and negative returns after it. There is also evidence to support abnormal returns being associated with buy trades, however these returns are generally earned in the periods well after the transaction has taken place. Furthermore, the profits arising from director trades appear to be negatively related to transaction value and firm size; that is, those trades which are small in terms of dollar value, and are within small cap companies, generally generate larger abnormal returns.

scholarly journals Comparison of Technical and Fundamental Analysis Trading Disciplines on Portfoilo Performance: Short and Long Term Backtest Analysis on Borsa İstanbul National Stock Indices

2021 ◽  
Vol 3 (3) ◽  
pp. 128-143
Author(s):  
Mustafa ÖZYEŞİL
Keyword(s):  
Abnormal Returns ◽  
Fundamental Analysis ◽  
Short Term ◽  
Risk And Return ◽  
Stock Indices ◽  
Technical And Fundamental Analysis ◽  
Increased Risk ◽  
Short And Long Term

The aim of this study is to comparatively analyze the backtest performances of trading disciplines applied in various portfolio baskets (Bist 30, 50 and 100) for different investment periods (short term – ytd and long term). According to the results of the analysis, it has been determined that in all trading disciplines, the investor has a higher return than the benchmark indicator in a 5-year term, that is, they can earn abnormal returns. Also, the return in the 5-year term is much higher than the 1-year and YTD returns. In the P / E & MA model, the Bist - 50 index in the 5-year period and the Bist - 100 index in the 1-year period provide the maximum return, while according to the P / E model, the Bist-30 and Bist -50 indices provide optimum returns in all maturity options. Based on these findings, it can be expected that if the trading disciplines used in this study are applied in a long term such as 5 years and on the portfolio basket consisting of Bist-30 and Bist-50 industrial stocks, it will maximize returns. In terms of risk and return, in YTD period, the sharpe and treynor ratios of the model portfolio formed in all trading disciplines except M /B trading discipline were lower than in 1 year in the 5-year investment period. This situation arose due to the increased risk of the portfolio as a result of the extended maturity and is in line with our expectations.

Fundamental analysis and the use of financial statement information to separate winners and losers in frontier markets: evidence from Vietnam

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tuan Ho ◽  
Y Trong Nguyen ◽  
Hieu Truong Manh Tran ◽  
Dinh-Tri Vo
Keyword(s):  
Financial Reporting ◽  
Design Methodology ◽  
Screening Tool ◽  
Abnormal Returns ◽  
Financial Statement ◽  
Supporting Evidence ◽  
Fundamental Analysis ◽  
Content Type ◽  
Listed Firms ◽  
Practical Implications

PurposeThe pupose of the paper is to study the usefulness of Piotroski (2000)'s F-score in separating winners and losers in Vietnam.Design/methodology/approachThe authors adopt a portfolio analysis and regression analysis on a sample of 501 of listed firms between 2009 and 2019 in Vietnam.FindingsThe authors find that a hedge strategy that buys high-F-score firms and sells low-F-score firms yield market-adjusted return of over 30 percent annually, which is statistically and economically significant. The hedge strategy based on F-score is not only profitable for value (high book-to-market [BM]) firms but also earn abnormal returns in a sample of growth (low BM) firms, suggesting that the usefulness of F-score strategy is not just a phenomenon in value firms as documented in previous literature.Research limitations/implicationsWhilst the authors' paper documents economically significant returns obtained from the F-score strategy, the authors do not examine what drives the abnormal returns.Practical implicationsThe results provide supporting evidence for the use of financial statement analysis as a screening tool to improve the performance of value investment in Vietnam stock market and for the training of financial reporting and fundamental analysis in universities.Originality/valueThe authors' research is the first study examining the F-score strategy in Vietnam that provides insights about the usefulness of fundamental analysis in separating winners and losers in a frontier market and contributes to the literature on fundamental analysis and market efficiency in emerging and frontier markets.

Germany’s New Insider Law: The Empirical Evidence after the First Year

2006 ◽  
Vol 7 (4) ◽  
pp. 449-462 ◽  
Author(s):  
Olaf Stotz
Keyword(s):  
Transaction Costs ◽  
Empirical Evidence ◽  
Insider Trading ◽  
Abnormal Return ◽  
Abnormal Returns ◽  
First Year ◽  
Insider Trades ◽  
Time Period ◽  
Trading Activities

Abstract This paper investigates insider trading activities in German stocks during the first year following implementation of the new Insider Law on 1 July 2002. It can be observed that insiders act as contrarian investors. They buy stocks after prices have fallen and sell stocks after prices have risen. In general, insider trades are very profitable. A typical stock purchased by an insider yields an abnormal return of almost 3 per cent during the 25 days following the transaction. In contrast, a typical stock that has been sold by insiders achieves an abnormal return of nearly -3 per cent over the same time period. Outsiders who copy the transactions of insiders can achieve nearly the same abnormal returns. Abnormal returns remain substantial even after transaction costs. The results suggest that prices of stocks in which insiders trade do not seem to be semi-strong efficient.

Information Content of Insider Trades before and after the Sarbanes-Oxley Act

2010 ◽  
Vol 85 (2) ◽  
pp. 419-446 ◽  
Author(s):  
Francois Brochet
Keyword(s):  
Stock Returns ◽  
Information Content ◽  
Abnormal Returns ◽  
Litigation Risk ◽  
Sarbanes Oxley ◽  
Insider Trades ◽  
Negative News ◽  
Before And After ◽  
Trading Volumes ◽  
Public Disclosures

ABSTRACT: This study examines the information content of Form 4 filings under the more timely disclosure regime introduced by Section 403 of the Sarbanes-Oxley Act of 2002 (SOX). Abnormal returns and trading volumes around filings of insider stock purchases are significantly greater after SOX than before. Abnormal trading volumes around filings of insider sales are also greater post-SOX, on average, but stock returns are not more negative. However, once controlling for pre-planned transactions, reporting lag, litigation risk, and news following insider trades, I find a negative association between returns around filings of insider sales and SOX. Overall, the evidence suggests that the prompt public disclosures about insider transactions mandated by the new rule are relevant to the pricing of securities. The results are also consistent with SOX and regulatory actions reducing the incentives to sell ahead of privately known negative news.

The Effects of Share Repurchase Announcements on Returns in the Malaysia Stock Market

2018 ◽  
Vol 1 (1) ◽  
pp. 1 ◽  
Author(s):  
Tze San Ong ◽  
Pei San Ng
Keyword(s):  
Stock Market ◽  
Abnormal Return ◽  
Small Firms ◽  
Abnormal Returns ◽  
Share Repurchase ◽  
Before And After ◽  
Positive Abnormal Return ◽  
Repurchase Announcements ◽  
Signaling Hypothesis ◽  
Firm Characteristic

This paper examines the market response surrounding the share repurchase announcements of Malaysia Listed Companies from years 2012 to 2016. One sample T-test was carried out to identify the abnormal return in the range before and after 20 days from share repurchase announcements. The result shows a significant positive abnormal return in the day of repurchase announcements and continuously until day 1 after the announcements. Multiple regression analysis was performed in order to identify the firm characteristic of share repurchase. The finding is supported with information asymmetric, which shows that stock market reacts more favorably through the repurchase announcements by small firms than large firms. This study is consistent with the signaling hypothesis that shows share repurchase announcement can be an effective tool in stabilizing the stock market in Malaysia. The finding of this study acts as a useful tool for managers and investors to improve their decisions on share repurchase announcements in Malaysia. Company’s managers can conduct share repurchase announcements that are able to make the stock market react positively in order to generate positive abnormal returns.

The Determinants of Merger Withdrawals’ Abnormal Returns in The Australian Market

2015 ◽  
pp. 89-110 ◽  
Author(s):  
Thuy Nguyen Thu ◽  
Giang Dao Thi Thu ◽  
Hoang Truong Huy
Keyword(s):  
Financial Crisis ◽  
Event Study ◽  
Abnormal Returns ◽  
Market Response ◽  
Crisis Period ◽  
Valuation Effects ◽  
Event Study Method ◽  
Private And Public ◽  
Method Of Payment ◽  
The Impact

This paper examines the abnormal returns in merger withdrawals in Australia, especially distinguishing the market response between private and public targets. We also study the determinants of those abnormal returns, including the method of payment and the impact of financial crisis periods. Using the event study method, we document that in the Australian context, the announced withdrawal of mergers involving private targets creates significantly negative valuation effects in comparison with the valuation effects in withdrawal of mergers involving public targets. We also find that a financial crisis period strongly affects abnormal returns of merger withdrawals. However, the method of payment does not have any impact on the abnormal returns.

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