In this paper we examine the profitability of corporate insider trades in the volatile markets of 2000-2003. Insiders are known to be contrarian traders. We hypothesize that profits from both contrarian trading and from trading based on useful inside information are large in volatile markets. We find that insider purchases are negatively related to firm size and recent stock returns and positively related to the firm's book-to-market equity ratio. Even after adjusting for contrarian trading, we find that insider trades generate significantly large future profits. This shows that insiders trade on useful private information and that such trades are profitable in volatile markets.
Insider acquisitions of shares are supposed to align the interests of managers and shareholders. Thus, purchases are typically viewed as positive signals. However, if the transactions do not put insiders' wealth at risk, perhaps this conclusion is premature. We test this idea by focusing on loan financing of insider share acquisitions. We find that loan-financed insider purchases and option exercises earn lower profits than do counterparts that are not loan financed. Our results also suggest that loan-financed insider purchases are an additional method to move an executive quickly to a target level of incentives.
NEW YORK (Reuters) - A former portfolio manager at billionaire's hedge fund said he engaged in insider trading "a number of times" at that firm and one other, as he testified at the trial of a technology consultant. , who worked at Mr. Cohen'sfrom June 2008 to January 2010, also testified on Friday [June 3] that he told federal agents "more than a dozen" people he had worked with over the years were involved in criminal conduct. He did not elaborate.
We examine the relation between dividends and information asymmetry by using insider returns as a proxy for information asymmetry. We find that dividends are negatively related to returns to insider trades across firms. Firms that pay consistently high dividends have lower insider returns than do firms that pay consistently low dividends. These results do not support traditional dividend signaling models. Rather, they are consistent with the proposition that firms with the highest dividends have the lowest levels of information asymmetry.
NEW YORK (Reuters) - A former trader pleaded guilty on Friday [Jan. 7] to conspiring with a former UBS AG investment manager to conduct insider trading in six UBS healthcare client acquisitions by using coded e-mail messages. The former trader,, 36, admitted before U.S. District Judge Paul Crotty in New York that he and his friendcommitted securities fraud in the deals between 2005 and February 2009.
NEW YORK (Reuters) - Using coded email messages referring to securities and money as "frequent flyer miles" and "potatoes," a high-ranking UBS investment banker and a trader made $870,000 in illegal profits from trades on tips about six UBS healthcare client acquisitions, U.S. prosecutors said. According to a criminal complaint filed in Manhattan federal court on Wednesday [March 24], from 2005 through February 2009 UBS AG banker Igor Poteroba agreed to leak confidential information about UBS and the six clients to trader Alexei Koval, assisted by another co-conspirator.
ASK THE FOOL I saw that insiders at Activision Blizzard recently sold about 3 million shares of its stock. When insiders sell thousands or millions of shares, who are the buyers?
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