Insiders’ Investment Horizons Matter in Interpreting Their Trades

Executives, directors and other corporate insiders have privileged access to material non-public information. Previous research shows that trades by insiders are informed, on average. For example, insider purchases tend to precede positive stock returns. In addition, like other investors, corporate insiders may have different investment horizons (i.e., anticipated stock-holding periods) when they trade their company’s stock, depending on their personal investment objectives and styles; desire for liquidity, diversification, or corporate control;, compensation contracts; or understanding and attitude toward insider trading laws.

In our recent paper, “Insider Investment Horizon,” we examine the relation between the investment horizon of corporate … Read more