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

Posted: 11 Aug 2005 Last revised: 23 Jan 2012

See all articles by John E. Core

John E. Core

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Wayne R. Guay

University of Pennsylvania - Accounting Department

Scott A. Richardson

London Business School; Acadian Asset Management

Rodrigo S. Verdi

Massachusetts Institute of Technology (MIT)

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Abstract

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.

Keywords: Accruals, SUE, share repurchases, insider trading

JEL Classification: G14, G35, M41, M43

Suggested Citation

Core, John E. and Guay, Wayne R. and Richardson, Scott Anthony and Verdi, Rodrigo S., Stock Market Anomalies: What Can We Learn from Repurchases and Insider Trading?. Review of Accounting Studies, Vol. 11, No. 1, pp. 49-70, 2006, Available at SSRN: https://ssrn.com/abstract=775224

John E. Core

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02138
United States

Wayne R. Guay

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
1329 Steinberg-Dietrich Hall
Philadelphia, PA 19104-6365
United States
215-898-7775 (Phone)
215-573-2054 (Fax)

Scott Anthony Richardson

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Acadian Asset Management ( email )

260 Franklin Street
Boston, MA 02110
United States

Rodrigo S. Verdi (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

Sloan School of Management
100 Main Street E62-666
Cambridge, MA 02142
United States
(617) 253 2956 (Phone)

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