Stock Market Anomalies: What Can We Learn from Repurchases and Insider Trading?

We examine whether managers' trading decisions (both at a firm and personal level) are correlated with trading strategies suggested by the operating accruals and the post-earnings announcement drift (SUE) anomalies. We discuss advantages and disadvantages of the use of managerial trading activi...

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Bibliographic Details
Published in:Review of accounting studies 2006-03, Vol.11 (1), p.49-70
Main Authors: Core, John E., Guay, Wayne R., Richardson, Scott A., Verdi, Rodrigo S.
Format: Article
Language:English
Subjects:
Accounting
Costs
Equity
Financial reporting
Hypotheses
Insider trading
Investments
Managers
Research design
Securities markets
Stock prices
Studies
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Summary:We examine whether managers' trading decisions (both at a firm and personal level) are correlated with trading strategies suggested by the operating accruals and the post-earnings announcement drift (SUE) anomalies. We discuss advantages and disadvantages of the use of managerial trading activity to infer managers' private valuation about their own securities. Our results provide corroborative evidence for the accruals anomaly, i.e., managers' repurchase and insider trading behavior varies consistently with the information underlying the operating accruals trading strategy. On the other hand, we do not find corroborative evidence for the SUE anomaly. [PUBLICATION ABSTRACT]
ISSN:1380-6653
1573-7136
DOI:10.1007/s11142-006-6395-y