From the research archives: Predictive and Statistical Properties of Insider Trading
Predictive and Statistical Properties of Insider Trading
Author(s): James H. Lorie and Victor Niederhoffer
Source: Journal of Law and Economics, Vol. 11, No. 1, (Apr., 1968), pp. 35-53
Published by: The University of Chicago Press
The subject has been studied before in many ways, but none of the preceding studies has been definitive and the additional methods of analysis seemed promising. Opinions are somewhat polarized. Academic studies have found virtually no evidence of profitable exploitation by insiders of their special knowledge and no value to outsiders in data on trading by insiders. Others believe that insiders often make extraordinary profits and that knowledge of their trading is valuable. Both the SEC and investors should be interested in which opinion is correct. The methods and coverage of this study differ from those of earlier work, as do our conclusions. We show that proper and prompt analysis of data on insider trading can be profitable, although almost all earlier academic work has reached the contrary conclusion.