Can Traders Beat the Market? Evidence from Insider Trades
This paper examines whether traders can beat the market from the perspective of execution quality. Using a revised Volume Weighted Average Price (VWAP) as the benchmark price, we analyze the trading performance of corporate insiders, and find that corporate insiders achieve positive trading alpha on both purchases and sales of stocks. The existence of a positive trading alpha is robust to controlling for firm, trading and insider characteristics. More importantly, we find evidence for the persistence in trading alpha. Those insiders who traded well in the past continue to trade well over time. Those who well execute in purchases of stocks also perform well in sales, and vice versa.
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