Insider Investment Horizon
65 Pages Posted: 17 Mar 2017
Date Written: March 2017
We examine the relation between insiders’ investment horizons and the informativeness of their trading activity regarding future stock returns. We show that both purchases and sales by short horizon insiders are more informative than those by long horizon insiders. Short horizon insiders better predict earnings surprises and large stock price changes. They also tend to come from firms with weaker corporate governance, be male, hold MBA or non-PhD degrees, and trade less following SEC investigations. Overall, our findings show that investment horizon of an insider is significantly associated with the informativeness of the insider’s trades.
Keywords: Insider trading, investment horizon, information asymmetry
JEL Classification: G12, G14, G18
Suggested Citation: Suggested Citation