Are Insiders' Trades Informative?

Josef Lakonishok and Inmoo Lee

No 6656, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We document insider trading activities of all companies listed on the NYSE, Amex, and Nasdaq exchanges during the 1975-1995 period. Insider trading is common, and in more than half the sample firms, there is at least some insider activity in a given year. In general, very little market movement is observed when insiders trade and when they report their trades to the SEC. Insiders in aggregate are contrarian investors. However, they predict market movements better than simple contrarian strategies. Insiders also seem to be able to predict cross-sectional stock returns. The result, however, is driven by insider's ability to predict returns in smaller firms. In addition, insider purchases are more informative than insider sales.

Date: 1998-07
Note: AP
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Citations: View citations in EconPapers (5)

Published as Review of Financial Studies, Volume: 14 Issue: 1 Pages: 79-111 (2001)

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