Insider Trading and Analyst Forecast Revisions: Global Evidence

40 Pages Posted: 31 Jan 2013

See all articles by Wen Jin

Wen Jin

Quantitative Management Associates

Joshua Livnat

New York University; Prudential Financial - Quantitative Management Associates

Yuan Zhang

University of Texas at Dallas

Date Written: January 30, 2013

Abstract

We examine how insider trading affects market responses to subsequent analyst forecast revisions in a global setting. We find stronger market responses to analyst forecast revisions subsequent to the insider trading than to other revisions. This stronger response is mainly driven by analyst forecast revisions that are in the same direction as the previous insider trading signal. In further analyses, we find that the market responses are stronger to analyst forecast revisions that follow insider sales for the US data, but stronger to revisions that follow insider purchases for the international data. Overall, our study suggests that investors view analyst forecast revisions as having different information content conditional on the existence and direction of previous insider trading signals and that investors seem to respond to both the analyst signal and the previous insider signal at the time analysts revise their forecasts, although the prior insider trading signal have been publicly known.

Suggested Citation

Jin, Wen and Livnat, Joshua and Zhang, Yuan, Insider Trading and Analyst Forecast Revisions: Global Evidence (January 30, 2013). Available at SSRN: https://ssrn.com/abstract=2209171 or http://dx.doi.org/10.2139/ssrn.2209171

Wen Jin

Quantitative Management Associates ( email )

100 Mulberry Street
Gateway Center 2
Newark, NJ 07102
United States

Joshua Livnat

New York University ( email )

44 West 4th Street, Suite 10-76
Stern School of Business
New York, NY 10012-1118
United States
212-998-0022 (Phone)
212-995-4004 (Fax)

Prudential Financial - Quantitative Management Associates ( email )

2 Gateway Center
6th Fl.
Newark, NJ 07102
United States

Yuan Zhang (Contact Author)

University of Texas at Dallas ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

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