Insider Trading Patterns
David C. Cicero
University of Tennessee, Knoxville
M. Babajide Wintoki
University of Kansas - School of Business
August 11, 2012
We document two patterns of informed non-routine insider stock trading: isolated trades and trade sequences. Isolated trades are trades in a single month while sequenced trades are those by the same insider over multiple consecutive months. Monthly abnormal returns immediately following isolated insider sale (purchase) months are 60 to 100 basis points (60 to 150 basis points) greater in magnitude than those following sequenced trades. However, once completed, sequences are followed by returns of similar magnitudes, suggesting they are also motivated by private information that is eventually (but more slowly) incorporated into prices. Sequences are associated with proxies for information asymmetry, investor inattention, and longer-lived private information.
Number of Pages in PDF File: 40
Keywords: insider trading, informed trading, executive trading, trade patterns
JEL Classification: G12, G14, G18working papers series
Date posted: August 12, 2012 ; Last revised: February 23, 2013
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