Some Insider Sales are Positive Signals

Posted: 28 Jun 2004

See all articles by James H Scott

James H Scott

Heilbrunn Center for Graham and Dodd Investing; General Motors Corporation - Asset Management; Journal of Investment Management (JOIM)

Peter Haiming Xu

Prudential Investments


Not all insider sales are the same. In the study reported here, a variable for shares traded as a percentage of insiders' holdings was used to separate information-driven sales from sales driven by liquidity or risk-reduction needs. In the insider trades from 1987 through 2002, only large sales that also accounted for large percentages of insiders' holdings predicted significantly negative future abnormal returns. Small sales that accounted for small percentages of shares owned not only did not predict poor performance but were correlated with significantly positive abnormal returns. The percentage of shares owned by insiders is also useful for predicting future returns following insider purchases.

Keywords: Equity Investments, Research Sources, Fundamental Analysis and Valuation Models

Suggested Citation

Scott, James H and Xu, Peter Haiming, Some Insider Sales are Positive Signals. Available at SSRN:

James H Scott (Contact Author)

Heilbrunn Center for Graham and Dodd Investing ( email )

3022 Broadway
New York, NY 10027
United States
212-854-1113 (Phone)

General Motors Corporation - Asset Management ( email )

767 5th Avenue
New York, NY 10153
United States

Journal of Investment Management (JOIM) ( email )

3658 Mt. Diablo Blvd.
Suite 200
Lafayette, CA 94549
United States

Peter Haiming Xu

Prudential Investments ( email )

213 Washington St Fl 6
Newark, NJ 07102
United States

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