Mimicking insider trades

Biwesh Neupane, Chandra Thapa, Marshall Andrew, Suman Neupane

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    Abstract

    We examine whether outside investors mimic insider trades by analyzing the daily transactions of foreign institutional investors (FII) in the Indian emerging market. We find that the value relevance of insiders' opportunistic buy trades is much higher in our context relative to that reported for developed markets. More importantly, we find that FII mimic opportunistic buy trades, which is more pronounced for firms that are informationally more opaque or have lower corporate governance quality. A long-short strategy based on FII's transactions after opportunistic trades generates an additional abnormal return of approximately 29% annually, compared to transactions based on routines trades.
    Original languageEnglish
    Article number101940
    Number of pages28
    JournalJournal of Corporate Finance
    Volume68
    Early online date31 Mar 2021
    DOIs
    Publication statusPublished - Jun 2021

    Keywords

    • Foreign institutional investors
    • Information asymmetry
    • Mimicking
    • Opportunistic insider trades
    • Routine insider trades

    ASJC Scopus subject areas

    • Finance

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