Journal of Finance Vol. 69 No. 1 2014

Informed Trading through the Accounts of Children

Henk Berkman¹; Paul D. Koch²; P. Joakim Westerholm^3,4

¹ University of Auckland · ² Iowa State University · ³ The University of Sydney · ⁴ College of Business Administration

Abstract

This study shows that the guardians behind underaged accounts are successful at picking stocks. Moreover, they tend to channel their best trades through the accounts of children, especially when they trade just before major earnings announcements, large price changes, and takeover announcements. Building on these results, we argue that the proportion of total trading activity through underaged accounts (labeled BABYPIN ) should serve as an effective proxy for the probability of information trading in a stock. Consistent with this claim, we show that investors demand a higher return for holding stocks with a greater likelihood of private information, proxied by BABYPIN .

DOI

10.1111/jofi.12043

Volume

69

Issue

1

Pages

363-404

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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