Insider Trading Patterns
Miami University of Ohio - Department of Finance
David C. Cicero
University of Alabama - Culverhouse College of Commerce & Business Administration
M. Babajide Wintoki
University of Kansas - School of Business
October 20, 2015
We find that corporate insiders trade over longer periods of time when they may have a longer-lived informational advantage. Controlling for the duration of insiders' trading strategies, we find that isolated stock sales and purchases, and extended sale and purchase sequences (those spread over multiple consecutive months), predict sizable abnormal returns on average. We discuss how failure to account for these trading patterns has previously masked the returns to insider trading. Finally, we provide evidence that insiders attempt to preserve their informational advantage to maximize trading profits by disclosing their trades after the market has closed. When insiders report their trades after business hours they are more likely to engage in sequences rather than isolated trades, they trade more shares over more days, and the abnormal returns are larger on average.
Number of Pages in PDF File: 45
Keywords: insider trading, informed trading, executive trading, trade patterns
JEL Classification: G12, G14, G18
Date posted: August 12, 2012 ; Last revised: October 21, 2015
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