Investor Attention and Insider Trading

76 Pages Posted: 22 Apr 2021 Last revised: 11 Apr 2024

See all articles by Sattar Mansi

Sattar Mansi

Virginia Tech

Lin Peng

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Jianping Qi

University of South Florida - College of Business Administration

Han Shi

Louisiana State University, Shreveport

Date Written: April 1, 2024

Abstract

We identify a new mechanism of opportunistic insider trading linked to attention-driven mispricing. Insiders are more likely to sell their company's stock during periods of heightened retail attention and more inclined to buy when attention diminishes. The results are particularly pronounced for lottery-type stocks and for firms with substantial retail ownership. We demonstrate that our findings-which relate to indicators of mispricing, retail order imbalances, and Robinhood herding episodes-extend to seasoned equity issuances and cannot be solely explained by firm fundamentals. Attention-based insider trading is less likely to result in SEC enforcement actions and persists across different regulatory regimes.

Keywords: Insider Trading; Retail Attention; Governance; SEC Enforcement

JEL Classification: G02, G12, G14

Suggested Citation

Mansi, Sattar and Peng, Lin and Qi, Jianping and Shi, Han, Investor Attention and Insider Trading (April 1, 2024). Available at SSRN: https://ssrn.com/abstract=3831504 or http://dx.doi.org/10.2139/ssrn.3831504

Sattar Mansi

Virginia Tech ( email )

Lin Peng (Contact Author)

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States

Jianping Qi

University of South Florida - College of Business Administration ( email )

USF College of Business
4202 E. Fowler Avenue, BSN 3403
Tampa, FL 33620-5500
United States
813-974-9856 (Phone)
813-974-3084 (Fax)

Han Shi

Louisiana State University, Shreveport ( email )

Shreveport, LA
United States

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