Wednesday, May 06, 2009
the only reasonably convincing study about insider trading i recall seeing was one that correlated the market to insider activity at several months of lead time -- that is, execs foresee and plan for purchases/sales at some distance to actual business trend changes.
but activity also tends to lag big moves as well -- as alphaville articulates a bit by citing forbes, corporate officers are not perfect seers but also just like everyone else and respond with herd behavior. i think that reality explains a lot of what watchers of insider trading observe -- take february 2008, for example.
I submit that the proper way of interpreting the insiders' bullishness in recent weeks and months is that there is a good probability that the stock market will be significantly higher in one year's time.
many corporate officers are experiencing negative equity for the first time in a long time, need to raise cash, are deleveraging. they're probably as terrified and wounded as anyone else. so it's quite difficult for me to make much sense of insider trends.