Economics, Econometrics and Finance
3 years ago

Retail investors benefit from following insider trades, improving stock price efficiency.

SSRN Electronic Journal
Can Retail Investors Learn from Insiders?
Ekkehart Boehmer, Bo Sang, Zhe Zhang

Paper Summary

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Retail investors tend to follow insider trading, especially when insiders make opportunistic purchases. This behavior leads to improved price efficiency for stocks bought by retail investors after opportunistic insider purchases. The evidence suggests that retail investors learn from informed insider purchases, which helps speed up price discovery.