The Market Evaluation of Information in Directors' Trades

34 Pages Posted: 25 Apr 2002

See all articles by Andrew P. Marshall

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School

David Hillier

University of Strathclyde - Department of Accounting and Finance

Abstract

The purpose of this paper is to examine the propensity, characteristics and performance of directors' trades. Consistent with prior research we show that on average, directors outperform the market. However, we also find that there exist a large number of trades which do not share these abnormal share price returns and consequently have little information content. This has important consequences for market participants who use director trading activity as a signal for their own trading strategies. Using different measures of directors' trades based on trade characteristics, we report that purchases by directors are more informative than sales. In addition, the number of directors trading within a twenty day window and the percentage of the directors' holding that is being traded are both important factors in the abnormal share price performance following the trade.

Suggested Citation

Marshall, Andrew P. and Hillier, David, The Market Evaluation of Information in Directors' Trades. Journal of Business Finance & Accounting, Vol. 29, pp. 77-110, 2002. Available at SSRN: https://ssrn.com/abstract=309109

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School ( email )

100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 548 3894 (Phone)

David Hillier (Contact Author)

University of Strathclyde - Department of Accounting and Finance ( email )

Curran Building
100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 330 4809 (Phone)
44 0141 330 4442 (Fax)

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