Insider Trading Patterns

49 Pages Posted: 12 Aug 2012 Last revised: 19 Apr 2016

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: October 20, 2015

Abstract

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, both their sales and purchases predict sizable abnormal returns on average. We discuss how failure to account for these trading patterns has previously masked the returns to insider trading, and show how accounting for them helps sharpen screens for corporate insiders who trade on information. We also 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 extended sequences of trades, they trade more shares overall, and their trades predict larger abnormal returns.

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

JEL Classification: G12, G14, G18

Suggested Citation

Biggerstaff, Lee and Cicero, David C. and Wintoki, M. Babajide, Insider Trading Patterns (October 20, 2015). 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

Paper statistics

Downloads
1,365
Rank
10,326
Abstract Views
6,083