Stock market anomalies: What can we learn from repurchases and insider trading?
John E. Core
Massachusetts Institute of Technology (MIT) - Sloan School of Management
Wayne R. Guay
University of Pennsylvania - Accounting Department
Scott A. Richardson
AQR Capital Management, LLC; London Business School
Rodrigo S. Verdi
Massachusetts Institute of Technology (MIT)
July 31, 2005
We examine whether managers' trading decisions (both at a firm and personal level) are correlated with trading strategies suggested by the operating accruals and the post-earnings announcement drift (SUE) anomalies. We discuss advantages and disadvantages of the use of managerial trading activity to infer managers' private valuation about their own securities. Our results provide corroborative evidence for the accruals anomaly, i.e., managers' repurchase and insider trading behavior varies consistently with the information underlying the operating accruals trading strategy. On the other hand, we do not find corroborative evidence for the SUE anomaly.
Number of Pages in PDF File: 41
Keywords: Accruals, SUE, share repurchases, insider trading
JEL Classification: G14, G30, G35, M41, M43
Date posted: April 20, 2004