Insider Demand and Industry Trends
Journal of Financial Research, Forthcoming
35 Pages Posted: 9 Jul 2019 Last revised: 1 Sep 2019
Date Written: July 4, 2019
Abstract
We investigate the time-series patterns in industry return predictability conditioned on insider demand from 1996 to 2016. Current insider demand within an industry is positively associated with higher future industry returns. This relation is primarily driven by the buy side of insider trades and is more pronounced during periods of economic recession and high market volatility where uncertainty and information asymmetry are relatively high. Our results are consistent with the notion that corporate insiders have an informational advantage that can be used as an indicator for industry portfolio selection.
JEL Classification: G11, G14
Suggested Citation: Suggested Citation