Industry Familiarity and Trading: Evidence from the Personal Portfolios of Industry Insiders
Publisher
ELSEVIER SCIENCE SACitation
Ben-David, I., Birru, J., & Rossi, A. (2018). Industry familiarity and trading: Evidence from the personal portfolios of industry insiders. Journal of Financial Economics.Journal
JOURNAL OF FINANCIAL ECONOMICSRights
© 2018 Elsevier B.V. All rights reserved.Collection Information
This item from the UA Faculty Publications collection is made available by the University of Arizona with support from the University of Arizona Libraries. If you have questions, please contact us at repository@u.library.arizona.edu.Abstract
We study whether industry familiarity is an advantage in stock trading by exploring the trading patterns of industry insiders in their own personal portfolios. To do so, we identify accounts of industry insiders in a large data set provided by a retail discount broker. We find that insiders trade firms from their own industry more frequently. Furthermore, they earn abnormal returns exclusively when trading own-industry stocks, especially obscure stocks (small, low analyst coverage, high volatility). In a battery of tests, we find no evidence of the use of private information. The results are most consistent with the interpretation that industry familiarity is an advantage in stock trading. (C) 2018 Elsevier B.V. All rights reserved.Note
24 month embargo; published online: 25 September 2018ISSN
0304-405XVersion
Final accepted manuscriptSponsors
Dice Center at the Fisher College of BusinessAdditional Links
https://www.sciencedirect.com/science/article/pii/S0304405X18302289ae974a485f413a2113503eed53cd6c53
10.1016/j.jfineco.2018.08.007