Do Informed Traders Win? An Analysis of Changes in Corporate Ownership around Substantial Shareholder Notices


  • *This project would not have been possible without the CHESS and Signal G database provided to us by the Australian Stock Exchange Limited (ASX). In particular we thank the following members of ASX staff or former staff: Michael Roche, Justine Newby, Bob Massina, Ray Wood and Steve Lidgard. The provision of CHESS data by ASX required that we maintain the confidentiality of these data and required that the data not be made available to other researchers without ASX permission. We have complied with both conditions. Other data used in this study were obtained from the Security Industry Research Centre of Asia-Pacific Limited (SIRCA). We also acknowledge the expert computer programming skills of William Huang and Joe Che-Tack Tang. Nirmal Saverimuttu gratefully acknowledges scholarship support for this project provided by ASX.

Raymond da Silva Rosa
WA Centre for Capital Markets Research
UWA Business School (M250)
The University of Western Australia
35 Stirling Highway
6009 Australia


The financial economics literature typically distinguishes between two classes of investors, namely ‘informed’ and ‘uninformed’ traders. Informed traders are those who possess some fundamental information about the true value of an asset, which is not readily available to other traders. Presuming that this information advantage is obtained from costly information search there is a general assumption that these traders realize superior returns. Unlike previous researchers, we access a unique panel of institutional and retail ownership (Clearing House Electronic Subregister System, CHESS records) that enable us to develop powerful measures that capture and benchmark abnormal changes in the share register across a number of dimensions. We find some evidence of a positive and significant relationship between the level of informed trading in the share register and abnormal market performance. However, our results suggest that informed traders move in and out of the share register in response to abnormal market performance, rather than in anticipation of abnormal market performance.