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International Journal of Business and Economics

International Journal of Business and Economics
Volume 3, No. 3

December, 2004
 
Insider Trading Performance in the Taiwan Stock Market
 
Min-Hsien Chiang
Institute of International Business, National Cheng Kung University, Taiwan
 
Long-Jainn Hwang
Department of International Business Management, Wu-Feng Institute of Technology, Taiwan
 
Yui-Chi Wu
Institute of International Business, National Cheng Kung University, Taiwan
 
Abstract
This paper investigates the performance of insider trading on the Taiwan Stock Exchange. In addition to a traditional single-factor model, the conditional Jensen's alpha approach proposed by Eckbo and Smith (1998) is employed as well. We also compare performances between mutual funds and insider portfolios. The empirical results show that insider trading does not gain any abnormal returns as found in previous studies, which is robust to weighting schemes and portfolio construction methods. Moreover, mutual funds weakly outperform insider portfolios, which leads to a conjecture that insiders may seek benefits of corporate control instead of short-term trading profits.
 
Keywords:insider trading, generalized method of moments, Jensen's alpha.
 
JEL Classifications:G14, G32.
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