Enhancing momentum strategy with insider transaction information in the Stock Exchange of Thailand

Abstract

This study introduces a novel approach to enhancing the momentum strategy in the Thai stock market. We combine the traditional momentum strategy, focusing on historical performance, with insights from insider transactions disclosed via SEC 59-2 forms. This dual approach aims to construct robust trading portfolios, with long positions in high-performing stocks backed by recent insider purchases and short positions in underperforming stocks accompanied by recent insider sales. Notably, our analysis spans the period from January 2016 to December 2022, encompassing the tumultuous era of the COVID-19-induced Thai stock market crashes.

Interestingly, we discovered the potential of using insider transaction information to construct trading portfolios capable of predicting future stock movements. Moreover, the integration of insider transaction data with the momentum strategy improved our portfolio's performance in terms of stronger returns and increased robustness over time. Regrettably, we have not yet identified a solution to make this momentum strategy resilient during market crash periods, which can lead to momentum crashes.