Insider trading and stock prices

Manouchehr Tavakoli, David McMillan and Phillip J. McKnight

International Review of Economics & Finance, 2012, vol. 22, issue 1, 254-266

Abstract: We examine the informational content of insider trades and its value to market investors using a US dataset. Overall, our results support the view that insider actions have positive predictive power for future returns. However, these results may come with some caveats. First, it is not the actions of all insiders (directors, officers and large shareholders) that have predictive power for future returns, but typically only those of directors and officers (senior management). Second, while director actions have predictive power for firm of all sizes, officers only have predictive power for small firms. The signal emanating from buys is stronger than the signal emanating from sells. Finally, the trading actions of directors, and to a lesser extent, officers have significant effects on the trading behaviour of other groups of insiders.

Keywords: Insider trades; Abnormal returns; Market efficiency (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:22:y:2012:i:1:p:254-266

DOI: 10.1016/j.iref.2011.11.004

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