Insider Investment Horizon |
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| Authors: | FERHAT AKBAS CHAO JIANG PAUL D KOCH |
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| Institution: | 1. Farhat Akbas is with College of Business Administration, University of Illinois at Chicago. Chao Jiang is with Darla Moore School of Business, University of South Carolina. Paul Koch is with Ivy College of Business, Iowa State University. We acknowledge the helpful comments of an anonymous referee;2. Christopher Anderson;3. Jim Barth;4. Henk Berkman;5. George Bittlingmayer;6. James Brown;7. Yongqiang Chu;8. David Cicero;9. David Emanuel;10. Suzanna Emelio;11. Egemen Genc;12. John Hackney;13. Jim Hilliard;14. Minjie Huang;15. Ozgur Ince;16. Namho Kang;17. Hugh Kim;18. David Lont;19. Helen Lu;20. Dimitris Margaritis;21. Alastair Marsden;22. Felix Meschke;23. Stefan Nagel (the Editor);24. Scott Schaput;25. Avanidhar Subrahmanyam;26. Eric Tan;27. Li Wang;28. Jide Wintoki;29. Jeffrey Wurgler;30. and seminar participants at Auburn, Canterbury, Iowa State, Mississippi State, Ohio, Alabama, Alabama at Birmingham, Auckland, Dayton, Kansas, New Hampshire, Otago, South Carolina, Wilfrid Laurier, and the 2017 SFS Finance Cavalcade Conference. We also thank Minjie Huang for providing executive pay duration data and Rajendra Srivastava (SeekEdgar LLC) for support regarding the 10-K data. None of the coauthors received any financial support for the particular research described in this paper, and they have nothing further to disclose with regards to The Journal of Finance Disclosure Policy. |
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| Abstract: | We examine the relation between insiders’ investment horizon and the information content of their trades with respect to future stock returns. We conjecture that an insider's investment horizon establishes a benchmark for expected patterns of continued trading behavior and thus helps identify unexpected insider trades, which should be more informative in efficient markets. Consistent with this conjecture, the trades of short-horizon insiders are both more unexpected and more informed, on average, than those of long-horizon insiders. Short-horizon insiders and their firms also tend to display characteristics that are associated with a greater focus on short-termism. |
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