Review of Financial Studies Vol. 14 No. 1 2001

Are Insider Trades Informative?

Josef Lakonishok¹; Inmoo Lee²

¹ University of Illinois Urbana-Champaign · ² Korea Advanced Institute of Science and Technology

Abstract

We examine insider trading activities of all companies traded on the NYSE, AMEX, and Nasdaq during the 1975-95 period. 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, informativeness of insiders' activities is coming from purchases, while insider selling appears to have no predictive ability. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

DOI

10.1093/rfs/14.1.79

Volume

14

Issue

1

Pages

79-111

Language

en

Sources

openalex crossref

Cite

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