文档介绍：Trade on the news? Information Trading
Information and Value
Investors attempt to assess the value of an asset based upon the information that they have about that asset at that point in time.
At the same time, different investors will arrive at different assessments of value for the same asset
Because the information they have is different
Because they have different ways of processing the same information
The price is determined by demand and supply.
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Information and Prices in an Efficient Market
A Slow Learning Market…
An Overreacting Market
Trading on Private Information
Insiders are managers, directors or major stockholders in firms. While they are constrained from trading ahead of information releases, they can still legally buy or sell stock in panies.
Analysts operate at the nexus of private and public information. To the extent that they “know” something about pany that the rest of us do not, their mendations should convey information to the market.
One way to examine whether private information can be used to earn excess returns is to look at whether insiders and analysts earn excess returns.
Insider Trading as a Leading Indicator of Stock prices..
More on insider trading…
Studies since support this finding, but it is worth noting that insider buying is a noisy signal – about 4 in 10 stocks where insiders are buying turn out to be poor investments, and even on average, the excess returns earned are not very large.
In a study in 1998, Lakonishok and Lee take a closer look at the price movements around insider trading. They find that firms with substantial insider selling have stock returns of % over the subsequent 12 months, which is significantly lower than the % earned by firms with insider buying.
However, they find that the link between insider trading and subsequent returns is greatest for panies and that there is almost no relationship at larger firms.
Insider trading - updated
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