IQ and corporate insiders’ decisions to time insider and outsider trading
Eugster, Florian; Kallunki, Jenni; Nilsson, Henrik; Setterberg, Hanna (2021-11-01)
Eugster, F, Kallunki, J, Nilsson, H, Setterberg, H. IQ and corporate insiders’ decisions to time insider and outsider trading. Eur Financ Manag, 2021; 27: 814– 840. https://doi.org/10.1111/eufm.12302
© 2021 The Authors. European Financial Management published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.
https://creativecommons.org/licenses/by-nc-nd/4.0/
https://urn.fi/URN:NBN:fi-fe2021120859508
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Abstract
We examine how corporate insiders’ cognitive ability (IQ) affects their decisions to time insider and outsider trading before abnormal stock price changes. Our analysis of archival data on male corporate insiders in Sweden shows they are less prone to time their insider selling and to sell in larger amounts, before abnormal stock price declines as IQ increases. We also find that insiders with a higher IQ are better at timing their outsider buying. Taken together, our results show that corporate insiders’ IQ affects their trading decisions differently, depending on whether they are trading in their insider or outsider stocks.
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