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Are insider trades informative? |
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| Authors: | Lakonishok, J Lee, I |
| Affiliation: | Department of Finance, College of Commerce and Business Administration, University of Illinois at Urbana-Champaign, Champaign, IL 61820, USA Tel: (217) 333 7185 Fax: (217) 244 3102 1 Korea Advanced Institute of Science and Technology, Korea E-mail: inmoo@kgsm.kaist.ac.kr |
| Abstract: | We examine insider trading activities of all companies tradedon the NYSE, AMEX, and Nasdaq during the 1975-1995 period. Ingeneral, very little market movement is observed when insiderstrade and when they report their trades to the SEC. Insidersin aggregate are contrarian investors. However, they predictmarket movements better than simple contrarian strategies. Insidersalso seem to be able to predict cross-sectional stock returns.The result, however, is driven by insider's ability to predictreturns in smaller firms. In addition, informativeness of insiders'activities is coming from purchases, while insider selling appearsto have no predictive ability. |
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