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Investment Intelligence from Insider Trading (MIT Press) Paperback – February 28, 2000
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About the Author
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 carefully proves that every major tested strategy to beat the market works best when insiders have bought their own company's stock. We have used several of the strategies suggested by Seyhun, and they work! Don't buy this wonderful book. We don't need the competition!(John D. Spears, Co-Manager, Tweedy, Browne American Value Fund and Tweedy, Browne Global Value Fund, and coauthor of What Has Worked in Investing)
We have long taught our business school students that corporate managers have better information about their companies' prospects and values than outside investors. But investment strategies based on mechanical responses to insider sales and purchases have routinely failed to beat the market averages. This book explains why and, in so doing, provides a guide that should help investors understand which corporate insiders have access to important information (not all insiders are created equal) and when insiders purchases are likely to be reliable signals of future improvement.(Joel Stern, Managing Partner, Stern Stewart and Co)
Professor Seyhun has written a serious, highly readable, and useful analysis of the informational content available to an outsider wishing to follow in the stock-picking tracks of an insider. Investors willing to 'mimic' large trades by top executives of smaller companies may find gold. The methods require attention to detail, prompt decision-making and are not without risk. The risk can be reduced by 'mimicking' 50 to 100 insider transactions. There may well be stock-picking gold in the informational content of the insider trading data, but it is more akin to dredging than picking up nuggets. Market timers and asset allocators will be encouraged by evidence that aggregate insider trading data forecasts future stock returns; there is additional useful information in industry-wide trading. Professor Seyhun has done the academic and investor world a great service.(Wesley G. McCain, PhD, CFA, Chairman, Towneley Capital Management, Inc.)
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)
Top Customer Reviews
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.
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.
The book has got two main themes. Chapter one to four plus chapter fourteen investigate the profitability of insider trading plus describe how to build a strategy around the trading and then also how the profitability can be enhanced. Then the rest of the book is a number of chapters that partly validate a number of other financial so called anomalies such as value and momentum etc. and also look into how these strategies interact with insider trading. The short story to this second set of chapters is that the author finds that insider trading dominates most other investment styles. Further, there is a stray chapter that looks at using insider trading for market timing of the overall stock market.
So what is the evidence when it comes to insider trading? Following insider trading is profitable. This is despite that the probability of one single deal is profitable after trading costs is lower than 50/50.Read more ›
Most Recent Customer Reviews
This is a terrific book , the author answers questions about Insider trading that I never thought to ask. Read morePublished on December 26, 2013 by PAUL GERTLER
Would that more financial books were written this way. Gets straight to the point, backs up conclusions with the data (and not the other way around), and examines various... Read morePublished on April 12, 2007 by Amazon Customer
Are you ready to learn from the somewhat mythical, sometimes notorious and often misunderstood inside traders? H. Read morePublished on March 28, 2001 by Rolf Dobelli