Corporate Insider Trading and Return Skewness
49 Pages Posted: 29 Jan 2018 Last revised: 22 Nov 2019
Date Written: July 21, 2019
Corporate insider trades predict idiosyncratic return skewness. CEO purchases are followed by an increase and CEO sales by a decrease in idiosyncratic skewness. The evidence suggests that this effect is driven by personal preferences rather than behavioral biases such as overconfidence. Our findings are consistent with the interpretation that CEOs, who are generally considered to be underdiversified, optimize their holdings by taking a preference for positive skewness into account. We observe particularly robust results for CEO sales, which substantiates the less common notion that insider sales can be informative for investors.
Keywords: insider trading, skewness
JEL Classification: G14, G39
Suggested Citation: Suggested Citation