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Are Insider Sales Under 10b5-1 Plans Strategically Timed?

Rik Sen

Hong Kong University of Science and Technology

June 30, 2008

Previous research and numerous media articles suggest that sales executed under 10b5-1 trading plans are strategically timed. However, we find no significant difference in stock price performance following plan sales and non-plan sales. We demonstrate that price contingent orders (e.g. limit orders), a common feature in trading plans, give rise to empirical patterns that have been taken as evidence of strategic timing of sales. Event study methods employed in previous research on plan sales are shown to give biased estimates of post-event abnormal returns when the events are not exogenous to past returns.

Number of Pages in PDF File: 36

Keywords: insider trading, SEC Rule 10b5-1, event studies

JEL Classification: G14, G18, K22

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Date posted: July 6, 2008 ; Last revised: July 9, 2008

Suggested Citation

Sen, Rik, Are Insider Sales Under 10b5-1 Plans Strategically Timed? (June 30, 2008). Available at SSRN: http://ssrn.com/abstract=1154837 or http://dx.doi.org/10.2139/ssrn.1154837

Contact Information

Rik Sen (Contact Author)
Hong Kong University of Science and Technology ( email )
Clear Water Bay, Kowloon
Hong Kong
+85223588298 (Phone)
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