Opportunism as a Firm and Managerial Trait: Predicting Insider Trading Profits and Misconduct

@inproceedings{Ali2017OpportunismAA,
  title={Opportunism as a Firm and Managerial Trait: Predicting Insider Trading Profits and Misconduct},
  author={Usman Ali},
  year={2017}
}
We show that opportunistic insiders can be identified through the profitability of their trades prior to quarterly earnings announcements (QEAs), and that opportunistic trading is associated with various kinds of firm/managerial misconduct. A value-weighted trading strategy based on (not necessarily pre-QEA) trades of opportunistic insiders earns monthly 4-factor alphas of over 1%—much higher than in past insider trading literature and substantial/significant even on the short side. Firms with… CONTINUE READING

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