RT Journal Article SR Electronic T1 Trading against the Grain: When Insiders Buy High and Sell Low JF The Journal of Portfolio Management FD Institutional Investor Journals SP 139 OP 151 DO 10.3905/jpm.2019.46.1.139 VO 46 IS 1 A1 Ruihai Li A1 Xuewu (Wesley) Wang A1 Zhipeng Yan A1 Qunzi Zhang YR 2019 UL https://pm-research.com/content/46/1/139.abstract AB Both behavioral biases and informational advantages can drive insider trades. The authors document that US corporate insiders anchor on the 52-week low (high) for stock purchases (sales). They then find that insider trades made when stock prices are far from their anchor levels are more informative, suggesting that when insiders trade against the anchoring bias, private information is providing the catalyst to overcome the bias. The authors further show that outside investors can reap sizeable abnormal returns by piggybacking on insiders who make these buy-high, sell-low trades.TOPICS: Exchanges/markets/clearinghouses, information providers/credit ratingsKey Findings• Corporate insiders are subject to anchoring bias when they trade. They tend to buy (sell) more when the stock price is near its anchor—the 52-week low (high).• Private information can help insiders overcome the anchoring bias. When insiders buy high and sell low, their trades are informative.• Outside investors can piggyback these “buy high and sell low” trades and reap sizeable returns.