Corporate Insider Trading and Return Skewness

49 Pages Posted: 29 Jan 2018 Last revised: 22 Nov 2019

See all articles by Wolfgang Drobetz

Wolfgang Drobetz

University of Hamburg

Emil Mussbach

University of Hamburg - Institute of Finance

Christian Westheide

University of Vienna - Department of Finance; Leibniz Institute for Financial Research SAFE

Date Written: July 21, 2019

Abstract

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

Drobetz, Wolfgang and Mussbach, Emil and Westheide, Christian, Corporate Insider Trading and Return Skewness (July 21, 2019). Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3105984 or http://dx.doi.org/10.2139/ssrn.3105984

Wolfgang Drobetz (Contact Author)

University of Hamburg ( email )

Moorweidenstrasse 18
Hamburg, 20148
Germany

Emil Mussbach

University of Hamburg - Institute of Finance ( email )

Von-Melle-Park 5
Hamburg, 20146
Germany

Christian Westheide

University of Vienna - Department of Finance ( email )

Bruennerstrasse 72
Vienna, 1210
Austria

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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