Investment Intelligence from Insider Trading [Paperback]

H. Nejat Seyhun (Author), Nejat Seyhun (Author)

Book Description

Publication Date: February 28, 2000

The term insider trading refers to the stock transactions of the officers, directors, and large shareholders of a firm. Many investors believe that corporate insiders, informed about their firms' prospects, buy and sell their own firm's stock at favorable times, reaping significant profits. Given the extra costs and risks of an active trading strategy, the key question for stock market investors is whether the publicly available insider-trading information can help them to outperform a simple passive index fund.Basing his insights on an exhaustive data set that captures information on all reported insider trading in all publicly held firms over the past twenty-one years--over one million transactions!--H. Nejat Seyhun shows how investors can use insider information to their advantage. He documents the magnitude and duration of the stock price movements following insider trading, determinants of insiders' profits, and the risks associated with imitating insider trading. He looks at the likely performance of individual firms and of the overall stock market, and compares the value of what one can learn from insider trading with commonly used measures of value such as price-earnings ratio, book-to-market ratio, and dividend yield.

Editorial Reviews

Review

"Considering the arcane nature of his subject, Seyhun manages genuine readability." Publishers Weekly"... insider information is becoming more widely available.... Now, it may be easier to fathom, too." Robert Barker, Business Week

"Seyhun is one of the leading academic experts on insider trading.His well-written and readable book on this subject is a valuableresource for both investors and researchers." Andrei Shleifer , Professor of Economics, Harvard University

About the Author

H. Nejat Seyhun is Chair and Professor of Finance at the University of Michigan Business School. --This text refers to an out of print or unavailable edition of this title.

Product Details

• Paperback: 442 pages
• Publisher: The MIT Press (February 28, 2000)
• Language: English
• ISBN-10: 0262692341
• ISBN-13: 978-0262692342
• Product Dimensions: 9 x 6.1 x 1 inches
• Shipping Weight: 1.5 pounds (View shipping rates and policies)
• Average Customer Review: 4.0 out of 5 stars  See all reviews (7 customer reviews)
• Amazon Best Sellers Rank: #508,325 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

19 of 19 people found the following review helpful:

4.0 out of 5 stars Making The Most Of Signals From Insiders, April 16, 2000

By 

S. Schneider (USA) - See all my reviews
(REAL NAME)   

This review is from: Investment Intelligence from Insider Trading (Hardcover)

I discovered this book after reading an interview in Outstanding Investor Digest of the managing partners from Tweedy Browne, who apparently received it enthusiastically. Now I find myself as enthusiastic as they seem to be about the book.

The expression "Insider Trading" tends to conjure images of Ivan Boesky, and others like him, using inside information for profit before the investing public has an opportunity to access that same information. This book is not about that. It is about the utilization of officially disclosed (via SEC filings) information regarding stock purchases and sales by the higher echelon of a firm's corporate managers. As such, it is an impressively researched examination of insider trading and how the individual investor might best make use of it.

Nejat Seyhun uses data spanning several decades (sometimes more) to demonstrate the utility of insider trading information as it might best be exploited by value investors, momentum investors or arbitrageurs. He offers some surprising conclusions concerning buy and selling within firms, conclusions which are nuanced by the size of the firm in question.

The book is a scholarly treatment of a kind of information which is likely to be misinterpreted by the individual investor. Although the book really is a carefully researched statistical exercise, it is readily accessible to investors of any pursuasion or level of expertise. Few books, investment or otherwise, seem to cater to both scholarly and popular audiences so well.

The book's only flaw is it does not pay particular attention to resources for insider trading information. As he mentions, the Wall Street Journal is also worthwhile.

5 of 5 people found the following review helpful:

4.0 out of 5 stars Insightful!, March 28, 2001

By 

Rolf Dobelli "getAbstract" (Switzerland) - See all my reviews
(HALL OF FAME REVIEWER)    (TOP 500 REVIEWER)    (REAL NAME)   

This review is from: Investment Intelligence from Insider Trading (Paperback)

Are you ready to learn from the somewhat mythical, sometimes notorious and often misunderstood inside traders? H. Nejat Seyhun has compressed a gargantuan amount of information - 21 year's worth of reported insider trades, more than one million transactions - into a manual that debunks and reconfigures the wild world of insider trading. Since inside traders are bound by strict laws, their prowess comes from proximity to the action. As a farmer can predict the next big storm by watching his cattle, sophisticated traders can predict the next market windfall by watching the insiders. This isn't a late-night page-turner; after all, Seyhun is a noted academic expert. Yet flashier verbal energy might have sacrificed the book's most valuable quality: precision. This book (the opposite of the Investing for Illiterates-type) takes its readers and itself seriously - If you are serious about your portfolio, we [...] recommend that you put yourself through Seyhun's course. Dedicated investors, policy makers and scholars need this on their reference shelves.

4 of 4 people found the following review helpful:

3.0 out of 5 stars Well researched, informative but too academic and long, February 4, 2005

By 

ServantofGod - See all my reviews

This review is from: Investment Intelligence from Insider Trading (Paperback)

Instead of talking about those dirty illegal insider trading, it is a long term study (from 70's to 90's) of legal, SEC filed stock transactions by company executives, accountants (insiders) to answer, from pg 317, "Can a potential stock market investor mimic insiders and make profits? If so, what is the magnitude of the profits? What kinds of risks does a mimicking strategy impose on outside investors? Given the risks, is it still worth it?"

By and large, the author did provide answers to the above. Profit for the mimicking is still available, after report delays, transaction costs and the need to mimic over 50 multiple transaction to lower risk. For a 12 mth holding period, the strategy outperforms the market by 2% for buying but underperforms by 3.3% for selling.

You can tell the conclusion is simple, but the author did use a lot of set up, with lengthly coverage of legal issues, before summing it up in the very last 14th chapter of this 341 content page book. As per title of this review, it is well researched, informative but too academic and long.

p.s. One minor complaint: The author should give more details on parameter setting and provide an optimal (profit maximization) strategy on the mimicking. Perhaps he did, but he didnt show it in the book.