momentum and insider trading efma：动量与内幕交易——联盟.pdfVIP

Momentum and Insider Trading* Qingzhong Ma Cornell University First draft : January 15, 2013 This draft: June 9, 2013 Abstract Insider trading activity contains important information for understanding momentum. In the short term, past winners (losers) continue to earn significant positive (negative) returns only if their insider trading activity indicates positive (negative) insider information. Thus, short-term momentum is attributable to investors underreacting to insider trading information that confirms past return. In the long term, past winners (losers) earn significant negative (positive) returns only if their insider trading activity indicates negative (positive) information. Thus long-term reversal is attributable to investors underreacting to insider trading information that disconfirms past return. After controlling for insider trading information, there is no evidence of overreaction. Key words: Momentum, Reversal, Insider trading, Insider silence, Underreaction * I am grateful to George Gao, Ming Huang, Andrew Karolyi, Hyunseob Kim, Claire Liang, Edith Liu, Xiaomeng Lu, Pam Moulton, David Ng, Andrey Ukhov, Eric Yeung, Kelvin Chunhui Zhang, Wei Zhang, and participants at the Cornell finance brownbag seminar for helpful suggestions, discussions, and/or comments. All remaining errors are my own. This paper supersedes an earlier version titled “The coupling of momentum and reversal.” Ma (contact author): 435 B Statler Hall, Cornell University, Ith