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Bridge over ocean
1 July 2010 Financial Analysts Journal Volume 66, Issue 4

Style Timing with Insiders

  1. Heather S. Knewtson
  2. Richard W. Sias
  3. David A. Whidbee

Aggregate demand by insiders predicts time-series variation in the value premium. Insider trading forecasts the value premium because insiders sell (buy) when markets—especially growth stocks—are overvalued (undervalued). This article suggests that investors can use signals from aggregate insider behavior to adjust style tilts and exploit sentiment-induced mispricing.

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