Informed Trading in Business Groups
Business groups, which are collections of legally independent companies with a significant amount of common ownership, dominate private sector activity in developing countries. This paper studies information flows within these groups by examining the trading performance of institutional investors in...
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Published by Oxford University Press on behalf of the World Bank
2021
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| Online Access: | http://hdl.handle.net/10986/36714 |
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okr-10986-367142021-12-10T05:10:47Z Informed Trading in Business Groups Pedraza, Alvaro INSIDER TRADING INSTITUTIONAL INVESTOR BUSINESS GROUP FINANCIAL SERVICES Business groups, which are collections of legally independent companies with a significant amount of common ownership, dominate private sector activity in developing countries. This paper studies information flows within these groups by examining the trading performance of institutional investors in firms that belong to the same group. Using a novel dataset with complete transaction records in Colombia, this paper estimates the difference in returns between trades of asset managers in group-affiliated companies and trades of non-affiliated managers in the same stocks during the same period. The data show that affiliated managers display superior timing ability and that their trades outperform those of non-affiliated managers by 0.85 percent per month. The evidence suggests that institutional investors with group affiliation access information that is only available to members of the group. In order to limit the use of private information, financial authorities might need to expand their disclosure rules to monitor the trades of group-affiliated investors. 2021-12-09T21:40:52Z 2021-12-09T21:40:52Z 2020-06 Journal Article World Bank Economic Review 1564-698X http://hdl.handle.net/10986/36714 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Published by Oxford University Press on behalf of the World Bank Publications & Research Publications & Research :: Journal Article Latin America & Caribbean Colombia |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
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INSIDER TRADING INSTITUTIONAL INVESTOR BUSINESS GROUP FINANCIAL SERVICES |
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INSIDER TRADING INSTITUTIONAL INVESTOR BUSINESS GROUP FINANCIAL SERVICES Pedraza, Alvaro Informed Trading in Business Groups |
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Latin America & Caribbean Colombia |
| description |
Business groups, which are collections of legally independent companies with a significant amount of common ownership, dominate private sector activity in developing countries. This paper studies information flows within these groups by examining the trading performance of institutional investors in firms that belong to the same group. Using a novel dataset with complete transaction records in Colombia, this paper estimates the difference in returns between trades of asset managers in group-affiliated companies and trades of non-affiliated managers in the same stocks during the same period. The data show that affiliated managers display superior timing ability and that their trades outperform those of non-affiliated managers by 0.85 percent per month. The evidence suggests that institutional investors with group affiliation access information that is only available to members of the group. In order to limit the use of private information, financial authorities might need to expand their disclosure rules to monitor the trades of group-affiliated investors. |
| format |
Journal Article |
| author |
Pedraza, Alvaro |
| author_facet |
Pedraza, Alvaro |
| author_sort |
Pedraza, Alvaro |
| title |
Informed Trading in Business Groups |
| title_short |
Informed Trading in Business Groups |
| title_full |
Informed Trading in Business Groups |
| title_fullStr |
Informed Trading in Business Groups |
| title_full_unstemmed |
Informed Trading in Business Groups |
| title_sort |
informed trading in business groups |
| publisher |
Published by Oxford University Press on behalf of the World Bank |
| publishDate |
2021 |
| url |
http://hdl.handle.net/10986/36714 |
| _version_ |
1764485755273478144 |