Research

Insiders’ information advantage: Evidence from competition with short sellers with Jana Fidrmuc and Roman Kozhan, JFQA (forthcoming), 2025.

We study the information content of corporate insiders’ trades after earnings announcements. We find little evidence that insiders trade on foreknowledge of material information in the post-SOX period. Conditioning on short-selling activity as a proxy for demand of arbitrageurs who exploit short-term mispricing, we show that insiders profit from selling because of their ability to exploit short-term mispricing after earnings releases. In contrast before SOX, insiders do take advantage of foreknowledge of material information while selling. Insider purchases are based on foreknowledge of material information both before and after SOX, but they are rare and have small economic magnitude.

Religion and Insider Trading Profits with Adriana Korczak and Piotr Korczak. Journal of Banking and Finance, 2023, 106778.

We use the controversial aspect of insider trading to analyze the impact of local social norms on insiders’ profits. We argue that religiosity is a source of social norms curbing self-interested behavior and, accordingly, it limits corporate insiders’ opportunistic trading on private information. Our results confirm that trades by insiders in firms located in more religious areas are followed by lower profits, those insiders are less likely to trade on future earnings news, and their trades are less likely to be opportunistic. The effect of religion on the profitability of insider trading holds across different levels of disclosure environments and is more pronounced in firms with poor corporate governance. Overall, we offer new insights into the effect of social norms on individuals’ financial decisions.

Sell-side analyst heterogeneity and insider trading with Francisco Marcet. Journal of Corporate Finance, 2021, (66), 101778.

This study explores insider trading patterns under different earnings surprises. After controlling for stock market liquidity and earnings announcements returns, we show that insiders sell more aggressively depending on the heterogeneity of analysts whose EPS forecasts are met or beaten to camouflage their trades. Specifically, insiders sell more shares of their company sooner after the publication of earnings when top analysts' forecasts are met or beaten. Consistent with the informed trading literature, insiders strategically select these moments because the stock price impact is low and the legal scrutiny of their trades is minimal. To support this result, we employ an exogenous drop in firms' analyst coverage due to the closure or merger of brokerage houses. Furthermore, in line with the camouflage incentives, by selling after top analysts' forecasts are met or beaten, stock prices adjust slowly to insider trades. Finally, we show that the incentives of insiders to hide their trades are concentrated in opportunistic insiders and members of the top management team, who are more likely to bear the costs of selling shares after positive news.

Arbitrageurs and overreaction to earnings surprises with Francisco Marcet. Finance Research Letters, 2021, (43), 101994.

This paper explores whether arbitrage trades could cause overreaction to earnings announcements. We contrast two hypotheses in a horse race: (1) whether short covering over positive news stocks generates overshooting in stock returns; (2) whether momentum traders trying to arbitrage the post-earnings announcements drift cause overreaction. We find evidence in line with the two hypotheses, but the overshooting is stronger for stocks with high covering. Also, we find that short sellers spot this overreaction and trade these stocks intensively. However, they trade more stocks with high short covering, suggesting that short sellers close their positions quickly to open new ones.

Strategic timing of corporate insiders when trading at earnings announcements. Finance Research Letters, 2020, (34), 101242.

This paper provides new evidence that insiders exploit their stock’s mispricing after earnings announcements rather than their foreknowledge of future cash flows to make profitable trades. Insiders buy and sell more intensively shortly after the publication of earnings (from day 0 to +5) in response to market reaction to earnings announcement, and the explanatory power is higher relative to book-to-market and long-term past returns. Also, in line with insiders trading on mispricing, insiders’ purchases and sales are profitable both after positive and negative earnings surprises, which indicates that their trading strategies are superior to simple contrarian or momentum strategies.

Financial markets and politics: The Piñera effect on the Chilean Capital Market with Claudio Bonilla and Jean Sepúlveda. Emerging Markets Finance and Trade, 2014. 50(sup1), 121-133.

The 2010 presidential election in Chile marked a change from the center-left coalition that governed the country for twenty years to a center-right coalition led by politician and businessman Sebastian Piñera. We study the effect that Piñera's presidential campaign had on the Chilean capital market. By using a panel of forty-nine companies during a period of thirteen months prior to the election, we find that there was a positive and significant effect on the capital market because of the expectation that Piñera would be elected president. That expectation continued throughout the entire presidential campaign.