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Corporate insider trading and return skewness

Wolfgang Drobetz, Emil Mussbach and Christian Westheide

Journal of Corporate Finance, 2020, vol. 60, issue C

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 their preference for positive return 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 (search for similar items in EconPapers)
JEL-codes: G14 G39 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jcorpfin.2019.07.008

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