Insider Trading Patterns

Journal of Corporate Finance, forthcoming

70 Pages Posted: 12 Aug 2012 Last revised: 15 May 2020

See all articles by Lee Biggerstaff

Lee Biggerstaff

Miami University of Ohio - Department of Finance

David C. Cicero

Harbert College of Business, Auburn University

M. Babajide Wintoki

University of Kansas - School of Business

Date Written: May 14, 2020

Abstract

We revisit the information content of stock trading by corporate insiders with an expectation that opportunistic insiders will spread their trades over longer periods of time when they have a longer-lived informational advantage, and trade in a short window of time when their advantage is fleeting. Controlling for the duration of insiders' trading strategies, we find robust new evidence that both insiders' sales and purchases predict abnormal stock returns. In addition, we provide evidence that insiders attempt to preserve their informational advantages and increase their 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 longer series of trades, they trade more shares overall, and their trades are associated with larger abnormal returns. Finally, we show how accounting for these trading patterns sharpens screens for corporate insiders who trade on information.

Keywords: insider trading, informed trading, executive trading, trade patterns

JEL Classification: G12, G14, G18

Suggested Citation

Biggerstaff, Lee and Cicero, David C. and Wintoki, Modupe Babajide, Insider Trading Patterns (May 14, 2020). Journal of Corporate Finance, forthcoming, Available at SSRN: https://ssrn.com/abstract=2128127 or http://dx.doi.org/10.2139/ssrn.2128127

Lee Biggerstaff

Miami University of Ohio - Department of Finance ( email )

Oxford, OH 45056
United States

David C. Cicero

Harbert College of Business, Auburn University ( email )

415 Magnolia Ave.
Auburn, AL 36849
United States

Modupe Babajide Wintoki (Contact Author)

University of Kansas - School of Business ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States

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