More than Just Contrarians: Insider Trading in Glamour and Value Firms

28 Pages Posted: 7 Sep 2013

See all articles by Alan Gregory

Alan Gregory

University of Exeter - Xfi Centre; University of Exeter Business School

Rajesh Tharyan

University of Exeter; University of Exeter Business School

Ian Tonks

University of Bristol

Date Written: September 2013

Abstract

This study examines the patterns of, and long‐run returns to, directors’ (insiders’) trades along the value‐glamour continuum in all stocks listed on the main London Stock Exchange and analyses what these directors’ trades add to a naïve value‐glamour strategy. We consider alternative definitions of value in defining trades and in the construction of our benchmark portfolios so that directors’ trades are evaluated net of any value‐glamour effect, variously defined. We find that directors consistently trade in a contrarian fashion, buying more value stocks and selling more glamour stocks, with purchases following price falls and sales following price rises. Directors’ buy signals in value stocks generate significant positive abnormal returns while the sell signals in glamour stocks generate smaller and generally insignificant negative returns. In contrast to the results from US studies, we find that the positive abnormal returns in value stocks persist for up to two‐years after the initial directors’ trading signal. Abnormal returns are particularly concentrated in smaller value stocks, and are robust to alternative definitions of value.

Keywords: insider trading, value, glamour

Suggested Citation

Gregory, Alan and Tharyan, Rajesh and Tonks, Ian, More than Just Contrarians: Insider Trading in Glamour and Value Firms (September 2013). European Financial Management, Vol. 19, Issue 4, pp. 747-774, 2013, Available at SSRN: https://ssrn.com/abstract=2321969 or http://dx.doi.org/10.1111/j.1468-036X.2011.00608.x

Alan Gregory (Contact Author)

University of Exeter - Xfi Centre ( email )

University of Exeter
Xfi Building, Rennes Dr.
Exeter, EX4 3BZ
United Kingdom

University of Exeter Business School ( email )

Streatham Court
Xfi Building Rennes Dr.
Exeter, EX4 4JH
United Kingdom

Rajesh Tharyan

University of Exeter ( email )

Northcote House
The Queen's Drive
Exeter, Devon EX4 4QJ
United Kingdom

University of Exeter Business School ( email )

University of Exeter
Xfi Building, Rennes Dr.
Exeter, EX4 4ST
United Kingdom
01392262544 (Phone)

HOME PAGE: http://business-school.exeter.ac.uk/about/whoswho/index.php?web_id=Rajesh_Tharyan

Ian Tonks

University of Bristol ( email )

Department of Finance and Accounting
15-19 Tyndalls Park Road
Bristol, BS8 1PQ
United Kingdom

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