City Research Online

Abstract

We find that insiders adopt dissimulation strategies to conceal their informational advantage and trade profitably when their firms’ stock prices reach 52-week highs and lows, exploiting the anchoring biases of uninformed investors. Insiders’ trading profitability depends on their firms’ future stock returns, operating efficiency, and investment sentiment, but not on earnings surprises. We document that male board members and insiders with long investment horizons are more likely to use dissimulation strategies. Overall, we provide evidence that insiders benefit from these price extremes, despite their status as publicly available, irrelevant, historical price levels that normally should not predict future stock returns.

Publication Type:	Article
Additional Information:	This is the peer reviewed version of the following article: Lasfer, M. & Ye, X. (2023). Corporate insiders’ exploitation of investors’ anchoring bias at the 52-week high and low. The Financial Review, which is to be published in final form at https://onlinelibrary.wiley.com/journal/15406288. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.
Publisher Keywords:	insider trading, 52-week price high/low, anchoring bias, recency bias, trading strategies, stock market anomalies
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School > Finance

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