Investment Intelligence from Insider Trading

Rating:
Summary: Insightful!
Review: Are you ready to learn from the somewhat mythical, sometimes notorious and often misunderstood inside traders? H. Nejat Seyhun has compressed a gargantuan amount of information - 21 year's worth of reported insider trades, more than one million transactions - into a manual that debunks and reconfigures the wild world of insider trading. Since inside traders are bound by strict laws, their prowess comes from proximity to the action. As a farmer can predict the next big storm by watching his cattle, sophisticated traders can predict the next market windfall by watching the insiders. This isn't a late-night page-turner; after all, Seyhun is a noted academic expert. Yet flashier verbal energy might have sacrificed the book's most valuable quality: precision. This book (the opposite of the Investing for Illiterates-type) takes its readers and itself seriously - If you are serious about your portfolio, we [...] recommend that you put yourself through Seyhun's course. Dedicated investors, policy makers and scholars need this on their reference shelves.


Rating:
Summary: Making The Most Of Signals From Insiders
Review: I discovered this book after reading an interview in Outstanding Investor Digest of the managing partners from Tweedy Browne, who apparently received it enthusiastically. Now I find myself as enthusiastic as they seem to be about the book.

The expression "Insider Trading" tends to conjure images of Ivan Boesky, and others like him, using inside information for profit before the investing public has an opportunity to access that same information. This book is not about that. It is about the utilization of officially disclosed (via SEC filings) information regarding stock purchases and sales by the higher echelon of a firm's corporate managers. As such, it is an impressively researched examination of insider trading and how the individual investor might best make use of it.

Nejat Seyhun uses data spanning several decades (sometimes more) to demonstrate the utility of insider trading information as it might best be exploited by value investors, momentum investors or arbitrageurs. He offers some surprising conclusions concerning buy and selling within firms, conclusions which are nuanced by the size of the firm in question.

The book is a scholarly treatment of a kind of information which is likely to be misinterpreted by the individual investor. Although the book really is a carefully researched statistical exercise, it is readily accessible to investors of any pursuasion or level of expertise. Few books, investment or otherwise, seem to cater to both scholarly and popular audiences so well.

The book's only flaw is it does not pay particular attention to resources for insider trading information. As he mentions, the Wall Street Journal is also worthwhile.

Rating:
Summary: Making The Most Of Signals From Insiders
Review: I discovered this book after reading an interview in Outstanding Investor Digest of the managing partners from Tweedy Browne, who apparently received it enthusiastically. Now I find myself as enthusiastic as they seem to be about the book.

The expression "Insider Trading" tends to conjure images of Ivan Boesky, and others like him, using inside information for profit before the investing public has an opportunity to access that same information. This book is not about that. It is about the utilization of officially disclosed (via SEC filings) information regarding stock purchases and sales by the higher echelon of a firm's corporate managers. As such, it is an impressively researched examination of insider trading and how the individual investor might best make use of it.

Nejat Seyhun uses data spanning several decades (sometimes more) to demonstrate the utility of insider trading information as it might best be exploited by value investors, momentum investors or arbitrageurs. He offers some surprising conclusions concerning buy and selling within firms, conclusions which are nuanced by the size of the firm in question.

The book is a scholarly treatment of a kind of information which is likely to be misinterpreted by the individual investor. Although the book really is a carefully researched statistical exercise, it is readily accessible to investors of any pursuasion or level of expertise. Few books, investment or otherwise, seem to cater to both scholarly and popular audiences so well.

The book's only flaw is it does not pay particular attention to resources for insider trading information. As he mentions, the Wall Street Journal is also worthwhile.

Rating:
Summary: Well researched, informative but too academic and long
Review: Instead of talking about those dirty illegal insider trading, it is a long term study (from 70's to 90's) of legal, SEC filed stock transactions by company executives, accountants (insiders) to answer, from pg 317, "Can a potential stock market investor mimic insiders and make profits? If so, what is the magnitude of the profits? What kinds of risks does a mimicking strategy impose on outside investors? Given the risks, is it still worth it?"

By and large, the author did provide answers to the above. Profit for the mimicking is still available, after report delays, transaction costs and the need to mimic over 50 multiple transaction to lower risk. For a 12 mth holding period, the strategy outperforms the market by 2% for buying but underperforms by 3.3% for selling.

You can tell the conclusion is simple, but the author did use a lot of set up, with lengthly coverage of legal issues, before summing it up in the very last 14th chapter of this 341 content page book. As per title of this review, it is well researched, informative but too academic and long.

p.s. One minor complaint: The author should give more details on parameter setting and provide an optimal (profit maximization) strategy on the mimicking. Perhaps he did, but he didnt show it in the book.

Rating:
Summary: Tips from an expert on legal insider trading
Review: Thanks to Ivan Boesky and his ilk, the term insider trading still carries a whiff of criminality. But the officers, directors and large shareholders of a firm, informed by knowledge of the firm's prospects, routinely buy and sell its stock at favorable times. Such activities are perfectly legal and can be highly profitable. H. Nejat Seyhun explains how outsiders can use readily available information about insider trading to their advantage. Given the costs and risks of an active trading strategy, the key question for most investors is whether such information can help them to outperform a simple passive index fund.

Basing his insights on an enormous data set that captures information on all reported insider trading in all publicly-held firms over the past twenty-one years (over a million transactions!) Seyhun shows how investors can best make use of insider information. He documents the magnitude and duration of the stock price movements following insider trading, determinants of insiders' profits, and the risks associated with imitating insider trading. He looks at the likely performance of individual firms and of the overall stock market, and compares the value of what one can learn from insider trading with commonly used measures of value such as price-earnings ratio, book-to-market ratio, and dividend yield. H. Nejat Seyhun is Chair of Finance and Professor of Business Administration at the University of Michigan Business School.

"Seyhun carefully proves that every major tested strategy to beat the market works best when insiders have bought their own company's stock. We have used several of the strategies suggested by Seyhun, and they work! Don't buy this wonderful book. We don't need the competition!" -John D. Spears, Co-Manager, Tweedy, Browne American Value Fund and Tweedy, Browne Global Value Fund, and Co-Author, WHAT HAS WORKED IN INVESTING

Professor Seyhun has written a serious, highly readable, and useful analysis of the informational content available to an outsider wishing to follow in the stock-picking tracks of an insider...[He] has done the academic and investor world a great service." -Wesley G. McCain, Ph.D., CFA, Chairman, Towneley Capital Management, Inc.

"We have long taught our business school students that corporate managers have better information about their compainies' prospects and values than outside investors. But investment strategies based on mechanical responses to insider sales and purchases have routinely failed to beat the market averages. This book explains why and, in so doing, provides a guide that should help investors understand which corporate insiders have access to important information (not all insiders are created equal) and when insider purchases are likely to be reliable signals of future improvement."-Joel Stern, Managing Partner, Stern Stewart and Co.

"Seyhun is one of the leading academic experts on insider trading. His well-written and readable book on this subject is a valuable resource for both investors and researchers." -Andrei Shleifer, Professor of Economics, Harvard University

Rating:
Summary: Great information!
Review: This book will teach you everything you need to know about insider trading.This is the best book available on insider trading.This book is worth alot more then it's cost.