Abstract

http://ssrn.com/abstract=1438250
 
 

References (30)



 
 

Citations (2)



 


 



Style Timing with Insiders


Heather S. Knewtson


Michigan Technological University

Richard W. Sias


University of Arizona - Department of Finance

David A. Whidbee


Washington State University - Department of Finance, Insurance and Real Estate

November 19, 2009


Abstract:     
Aggregate demand by insiders predicts time-series variation in the value premium — between 1978 and 2004, a one standard deviation increase in aggregate insider demand in the previous six months forecasts a 53 basis point decline (6.54% annualized) in the expected value premium in the month following publication of the insider trading data. Further tests suggest that insider trading forecasts the value premium because insiders trade against systematic investor sentiment-induced mispricing and growth stocks are more sensitive to changes in sentiment than value stocks, i.e., insiders sell (buy) when markets, and growth stocks especially, are overvalued (undervalued). As a result, our analysis suggests that investors can use signals from aggregate insider behavior to adjust style tilts and exploit sentiment-induced mispricing.

Number of Pages in PDF File: 43

JEL Classification: D82

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Date posted: July 26, 2009 ; Last revised: November 23, 2009

Suggested Citation

Knewtson, Heather S. and Sias, Richard W. and Whidbee, David A., Style Timing with Insiders (November 19, 2009). Available at SSRN: http://ssrn.com/abstract=1438250 or http://dx.doi.org/10.2139/ssrn.1438250

Contact Information

Heather S. Knewtson
Michigan Technological University ( email )
School of Business & Economics
1400 Townsend Drive
Houghton, MI 49931
United States
906-281-2798 (Phone)
Richard W. Sias (Contact Author)
University of Arizona - Department of Finance ( email )
McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
David A. Whidbee
Washington State University - Department of Finance, Insurance and Real Estate ( email )
Todd 480
PO Box 644746
Pullman, WA 99164-4746
United States
509-335-3098 (Phone)
509-335-3857 (Fax)
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