Is “Not Trading” Informative? Evidence from Corporate Insiders’ Portfolios

Luke DeVault, Scott Cederburg, Kainan Wang

Research output: Contribution to journalArticlepeer-review

Abstract

Some individuals, e.g., those holding multiple directorships, are insiders at multiple firms. When they execute an insider trade at one firm, they may reveal information about the value of all—both the traded insider position and not-traded insider position(s)—the securities held in their “insider portfolio.” We find that insider “not-sold” stocks outperform “not-bought” stocks. Implementable trading strategies that buy not-sold stocks following the disclosure of a sale earn alphas up to 4.8% per year after trading costs. The results suggest that even insider sales that are motivated by liquidity and diversification needs can provide value-relevant information about insider holdings.

Original languageEnglish (US)
Pages (from-to)79-100
Number of pages22
JournalFinancial Analysts Journal
Volume78
Issue number1
DOIs
StatePublished - 2022
Externally publishedYes

Keywords

  • 2.0
  • informed trading
  • insider trading
  • portfolio insider

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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