Publicly traded homebuilders' and insiders' trading: a new perspective

摘要

Purpose - The purpose of this paper is to examine the insiders' activities (buy/sell) during the recentrnmeltdown of the homebuilders' industry.rnDesign/methodology/approach - This study applies a regression model to analyze thernrelationship between the insiders' net sales and variables that could be affecting the tradingrndecisions controlling for other market variables.rnFindings - The results show that CEOs of homebuilding companies had net positive sellingrnactivities and enjoyed massive gains by timing the market correctly. The insiders' massive sellingrnperiod was followed by significant declines in share prices of homebuilding companies. Morernspecifically, CEOs (but not all top executives) acted as contrarian investors and sold when the sharernprices hit a record high, coupled by optimistic analysts' recommendations, which were later seen asrnincorrect by the market. Also, CEOs sold at a time when EPS was at its highest level.rnResearch limitations/implications - The current work can not disprove the "argument ofrndiversification" cited by insiders as the reason for their stock sell off, mainly because it is not possiblernto obtain data about the CEOs' personal portfolios.rnPractical implications - This paper implies that CEOs were able to time the market by forecastingrnthe trend in their industry.rnOriginality/value - The paper investigates the period between January 2004 and August 2007rnwhich is characterized by mass selling by CEOs in the whole industry of home building companiesrnand not only a specific entity.