NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Industry Familiarity and Trading: Evidence from the Personal Portfolios of Industry Insiders

Itzhak Ben-David, Justin Birru, Andrea Rossi

NBER Working Paper No. 22115
Issued in March 2016, Revised in December 2016
NBER Program(s):Asset Pricing, Corporate Finance

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.

download in pdf format
   (495 K)

email paper

Supplementary materials for this paper:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22115

Users who downloaded this paper also downloaded* these:
Pan, Wang, and Weisbach w22091 How Management Risk Affects Corporate Debt
Levitt, List, and Sadoff w22107 The Effect of Performance-Based Incentives on Educational Achievement: Evidence from a Randomized Experiment
Bernard, Smeets, and Warzynski w22114 Rethinking Deindustrialization
Goetzmann, Kim, and Shiller w22143 Crash Beliefs From Investor Surveys
Black, Devereux, Lundborg, and Majlesi w21332 On the Origins of Risk-Taking
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us