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Finance & Accounting
Pages 15 (3765 words)
Contents Introduction 3 Research 6 Methodology and Design of the Analysis 11 Analysis 14 Case study analysis 14 Mathematical Analysis 16 Abnormal Gain on sale transactions 18 Should the investors follow Directors? 24 References 25 Introduction In the financial market, there are investors and financial analysts have devised various methods based on which they always strive to generate better profits and return…
Investors are always looking for strategies through which they can generate higher return on their investment whether that particular strategy falls within the domain of any particular theory or not. Through this paper a unique method of increasing the investor’s return is analyzed, i.e. by following the transaction pattern of a director of the corporation. The directors in corporations all around the globe are actively involved in insider trading of their shares, and being on a strategic position they are well aware of the future outlook of their company. It is a general notion that the directors of the company are able to generate profits by selling the shares of the company and this paper tries to provide empirical evidence for it. The paper has two primary objectives: (1) Whether directors are able to generate abnormal gain through insider trading of the shares, as suggested by various economists and financial analyst (based on American Stock Market) (2) Can individual and corporate shareholder can also earn good return by following in the footsteps of the directors. In the world of economics and finance, when it comes to financial malpractices, insider trading tops the list. ...
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