When brokers, analysts, and fund managers buy or sell stocks for their own accounts, these “access employees” of financial institutions outperform retail investors over short windows up to a month. They earn particularly high abnormal returns when they trade before earnings announcements, revisions of analyst recommendations, and large stock price changes. We also find evidence consistent with profitable front-running and information leakage around the execution of corporate insider trades and block trades by mutual funds, as well as the release of revised recommendations by analysts who work at the same brokerage firm.

Changes in short-term expected market returns (discount rates) were a significant driver behind the unprecedented fluctuations in equity markets during the first 4 months of the COVID-19 pandemic. Using option-based estimates of the expected market risk premium for 13 international markets, we find that approximately 40% of the change in market values during the COVID-19 pandemic can be attributed to changes in short-term discount rates. We also document sharply downward sloping term structures of equity risk premia at the start of the pandemic, consistent with Hasler and Marfè (2016). Finally, we document a significant increase in the correlation between index returns and changes in the short-term discount rate during the pandemic compared to the period before the pandemic.