In Search of Opportunistic Trades of Corporate Insiders: Evidence from the US Market

Abstract

This study investigates the opportunistic trading behaviour of core insiders’ group compared with that of non-core insiders’ group. Specifically, we investigate whether trades of these corporate insiders’ groups are driven by superior information or contrarian beliefs about firms’ future earnings, or both, in order to earn abnormal returns. We document that although both core and non-core insiders’ groups are equally motivated by contrarian beliefs, their motivational differences regarding opportunistic trades are primarily tied to preferential and favoured access to superior private information. In addition, we find evidence that information asymmetry and the Global Financial Crisis (GFC) have effects on their opportunistic trades. We also reveal that abnormal returns earned by core insiders’ group from their opportunistic trades are related to superior information about firms’ future earnings. Our findings have significant implications for opportunistic insider trading in the US market.

Keywords: Opportunistic Trades; Core Insiders; Non-Core Insiders; Contrarian Beliefs; Superior Information

JEL Classification: G14