Department of Finance
University of Arizona
Institutional Affiliation: University of Arizona
NBER Working Papers and Publications
|March 2016||Industry Familiarity and Trading: Evidence from the Personal Portfolios of Industry Insiders|
with Itzhak Ben-David, Justin Birru: w22115
We study whether industry familiarity is an advantage in stock trading by exploring the trading patterns of industry insiders in their own personal portfolios. To do so, we identify accounts of industry insiders in a large dataset provided by a retail discount broker. We find that insiders trade firms from their own industry more frequently. Furthermore, they earn abnormal returns exclusively when trading own-industry stocks, especially obscure stocks (small, low analyst coverage, high volatility). In a battery of tests, we find no evidence of the use of private information. The results are most consistent with the interpretation that industry familiarity is an advantage in stock trading.
Published: Itzhak Ben-David & Justin Birru & Andrea Rossi, 2018. "Industry Familiarity and Trading: Evidence from the Personal Portfolios of Industry Insiders," Journal of Financial Economics, . citation courtesy of