Smart Money

The 'Smart Money' area summarizes papers implementing trading strategies that follow the lead of sophisticated investors having a comparative advantage in performing fundamental analysis (e.g., insiders, short sellers). Long positions are taken in securities that are being accumulated by sophisticated investors and short positions are taken in securities that are being unloaded by sophisticated investors.

Seyhun (1998)^aaa

This book provides an excellent summary of academic research on the profitability of trading strategies based on insider trading.

Dechow et al. (2001)^aa [Click Here to Download as PDF]

Shows that trading strategies based on following the lead of short-sellers generate abnormal returns and analyses the source of these returns.