Are the Insider Trades of a Large Institutional Investor Informed?

Using a unique data set, we try to determine whether a large institution's (FMR Corp., Fidelity Funds' holding company) insider trades are informed. Theoretical studies of large informed traders suggest that their buy trades could outperform their sell trades, that they can optimally exploit their information advantage by varying the pace of trade execution, and that their information advantage could be short- or long-lived. Although there is evidence of each of these, FMR appears to be informed only for quickly executed buy trades. Other trades outperform a stock market index but not a four-factor return model. FMR's incentive fee schedules could explain this because they pay bonuses when FMR outperforms a market index