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The '''insider investment strategy''' is an [[investment strategy]] that follows the buying and selling decisions of [[insider trading|insiders]]. It has historically outperformed the market over the long-run.{{fact|date=September 2014}} The primary insiders have information advantage and the proven theory is that they as a group over time will do better than the average investor on the Stock Exchange. However in the world there are only a few investment funds that follow the insider trades, both of them were established in 2011.<ref>{{cite web | url = http://dovreforvaltning.com/en/content/funds | title = Fund Facts: Dovre Inside Nordic | publisher = Dovre Forvaltning}}</ref>
"Investment: Insiders' strategy"

==Insiders’ strategy==

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The insider buying strategy has historically outperformed the market over the long-run. The primary insiders have information advantage and the proven theory is that they as a group over time will do better than the average investor on the Stock Exchange. However in the world there are only a few investment funds that follow the insider trades, both of them were established in 2011.<ref>{{cite web | url = http://dovreforvaltning.com/en/content/funds | title = Fund Facts: Dovre Inside Nordic | publisher = Dovre Forvaltning}}</ref>
In America Catalyst Capital Advisors LLC <ref>{{cite web | url = http://catalystMF.com | title = America Catalyst Capital Advisors | publisher = America Catalyst Capital Advisors}}</ref> manages <ref>{{cite web | url = http://catalystmf.com/i/u/6149790/f/INSAX_Investor_Presentation_2014-08.pdf | title = America Catalyst Capital Advisors | publisher = America Catalyst Capital Advisors}}</ref> Catalyst Insider Buying Fund . This fund is a large-cap, long-only equity fund that only invests in companies where corporate insiders are buying their own company’s stock on the open market.
In America Catalyst Capital Advisors LLC <ref>{{cite web | url = http://catalystMF.com | title = America Catalyst Capital Advisors | publisher = America Catalyst Capital Advisors}}</ref> manages <ref>{{cite web | url = http://catalystmf.com/i/u/6149790/f/INSAX_Investor_Presentation_2014-08.pdf | title = America Catalyst Capital Advisors | publisher = America Catalyst Capital Advisors}}</ref> Catalyst Insider Buying Fund . This fund is a large-cap, long-only equity fund that only invests in companies where corporate insiders are buying their own company’s stock on the open market.
In Europe Dovre Forvaltning UAB <ref>{{cite web | url = https://www.dovreforvaltning.com/en/content/about-us | title = Dovre Forvaltning | publisher = Dovre Forvaltning}}</ref> manages Dovre Inside Nordic fund.<ref>{{cite web | url = https://www.dovreforvaltning.com/en/din | title = Fund Facts: Dovre Inside Nordic | publisher = Dovre Forvaltning}}</ref> This fund is a Nordic equity fund, which strategy is to follow the primary insiders in listed companies and/or shareholders with assumed close relationship to company, board and management.
In Europe Dovre Forvaltning UAB <ref>{{cite web | url = https://www.dovreforvaltning.com/en/content/about-us | title = Dovre Forvaltning | publisher = Dovre Forvaltning}}</ref> manages Dovre Inside Nordic fund.<ref>{{cite web | url = https://www.dovreforvaltning.com/en/din | title = Fund Facts: Dovre Inside Nordic | publisher = Dovre Forvaltning}}</ref> This fund is a Nordic equity fund, which strategy is to follow the primary insiders in listed companies and/or shareholders with assumed close relationship to company, board and management.

Revision as of 16:37, 27 September 2014

The insider investment strategy is an investment strategy that follows the buying and selling decisions of insiders. It has historically outperformed the market over the long-run.[citation needed] The primary insiders have information advantage and the proven theory is that they as a group over time will do better than the average investor on the Stock Exchange. However in the world there are only a few investment funds that follow the insider trades, both of them were established in 2011.[1] In America Catalyst Capital Advisors LLC [2] manages [3] Catalyst Insider Buying Fund . This fund is a large-cap, long-only equity fund that only invests in companies where corporate insiders are buying their own company’s stock on the open market. In Europe Dovre Forvaltning UAB [4] manages Dovre Inside Nordic fund.[5] This fund is a Nordic equity fund, which strategy is to follow the primary insiders in listed companies and/or shareholders with assumed close relationship to company, board and management.

Insider trading studies

Year Author Article/Research
2006 Emanuele Bajo, Barbara Petracci Do what insiders do: Abnormal performances after the release of insiders’ relevant transactions[6]
2003 Mathijs A. Biesta, Ronald Q. Doeswijk, Han A. Donker The Profitability of Insider Trades in the Dutch Stock Market [7]
2002 Sylvian Friederich, Alan Gregory, John Matatko, Ian Tonks Short-run Returns around the Trades of Corporate Insiders on the London Stock Exchange [8]
2001 Josef Lakonishok and Inmoo Lee Are Insider Trades Informative?[9]
1997 Alan Gregory, John Matatko and Ian Tonks Detecting Information From Directors Trades: Signal definition and variable size effects [10]
1985 Dan Givoly, Dan Palmon Insider Trading and the Exploitation of Inside Information: Some Empirical Evidence [11]
1979 Jerome B. Baesel, Garry R. Stein The Value of Information: Inferences from the Profitability of Insider Trading [12]
1976 Joseph E. Finnerty Insiders and Market Efficiency [13]
1974 Jeffrey F. Jaffe Special Information and Insider Trading [14]
1968 James H. Lorie, Victor Niederhoffer Predictive and Statistical Properties of Insider Trading [15]
1966 Garry A. Glass Extensive Insider Accumulation as an Indicator of Near-Term Stock Price Performance [16]

Lorie-Niederhoffer study „indicates that proper and prompt analysis of data on insider trading can be profitable“.

Glass examines 14 different calendar months and selects the eight securities with the greatest excess of buyers to sellers among insiders within a month. He finds that the average return on these securities is 10 percent above the return on the stock market as a whole in the 7 months following the individual months of intensive buying.

In 2014 Dovre Forvaltning shared there analysis on insiders influence in the Nordic region.[17] The company analyzed these different yearly portfolios (both for Purchases and Sales):[18]

  • Had an insider Purchases in the past 1/3/6 months.
  • Had only insider Purchases in the past 1/3/6 months.
  • Last insider transaction in the past 1/3/6 months was an insider Purchase.
  • Had an insider Sales in the past 1/3/6 months.
  • Had only insider Sales in the past 1/3/6 months.
  • Last insider transaction in the past 1/3/6 months was an insider Sale.

Only transactions above 80.000 SEK were included (33% of all insider trades were excluded because they were too small). If there were no Purchases/Sales in 1,3,6 months after a company’s inclusion, it was excluded from the portfolio. All stocks are equally weighted. The analysis [19] showed that:

  • Highest outperformance is in Small Caps insider Purchase portfolios. Smaller in Mid Caps Purchase portfolios. And smallest in Large Caps insider Purchase portfolios.
  • ‘Insider effect’ fades away with longer holding horizon.
  • Sell signals are stronger than Buy signals.
  • Sell signals are the strongest when more than 50% of holdings are sold.
  • Buy signals are the strongest when signal transaction value is <80.000 SEK.

References

  1. ^ "Fund Facts: Dovre Inside Nordic". Dovre Forvaltning.
  2. ^ "America Catalyst Capital Advisors". America Catalyst Capital Advisors.
  3. ^ "America Catalyst Capital Advisors" (PDF). America Catalyst Capital Advisors.
  4. ^ "Dovre Forvaltning". Dovre Forvaltning.
  5. ^ "Fund Facts: Dovre Inside Nordic". Dovre Forvaltning.
  6. ^ "Do what insiders do: Abnormal performances after the release of insiders' relevant transactions" (PDF). Emanuele Bajo, Barbara Petracci.
  7. ^ "The Profitability of Insider Trades in the Dutch Stock Market". Mathijs A. Biesta, Ronald Q. Doeswijk, Han A. Donker.
  8. ^ "The Profitability of Insider Trades in the Dutch Stock Market" (PDF). Sylvian Friederich, Alan Gregory, John Matatko, Ian Tonks.
  9. ^ "Are Insider Trades Informative?" (PDF). Josef Lakonishok and Inmoo Lee.
  10. ^ "Detecting Information From Directors Trades: Signal definition and variable size effects". Alan Gregory, John Matatko and Ian Tonks.
  11. ^ "Insider Trading and the Exploitation of Inside Information: Some Empirical Evidence". Dan Givoly, Dan Palmon.
  12. ^ "The Value of Information: Inferences from the Profitability of Insider Trading". Jerome B. Baesel, Garry R. Stein.
  13. ^ "The Value of Information: Inferences from the Profitability of Insider Trading" (PDF). Jerome B. Baesel, Garry R. Stein.
  14. ^ "Special Information and Insider Trading". Jeffrey F. Jaffe.
  15. ^ "Predictive and Statistical Properties of Insider Trading" (PDF). James H. Lorie, Victor Niederhoffer.
  16. ^ "Extensive Insider Accumulation as an Indicator of Near-Term Stock Price Performance". Garry A. Glass.
  17. ^ "Dovre Inside Nordic". Dovre Forvaltning.
  18. ^ "Dovre Inside Nordic". Dovre Forvaltning.
  19. ^ "Fund Facts: Dovre Inside Nordic". Dovre Forvaltning.
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