Publication Type
Journal Article
Version
acceptedVersion
Publication Date
8-2019
Abstract
We present evidence of investors underreacting to the absence of events in financialmarkets. Routine-based insiders strategically choose to be silent when they possessprivate information not yet reflected in stock prices. Consistent with our hypothesis,insider silence following routine sell (buy) predict positive (negative) future return aswell as fundamentals. The return predictability of insider silence is stronger amongfirms with poor information environment and facing higher arbitrage costs, and alarge fraction of abnormal returns concentrates on future earnings announcements. Along-short strategy that exploits insiders’ strategic silence behavior generates abnormalreturns of 6% to 10% annually
Keywords
Insider Silence, Information Content, Underreaction, Return Predictability
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
Journal of Financial and Quantitative Analysis
Volume
54
Issue
4
First Page
1499
Last Page
1538
ISSN
0022-1090
Identifier
10.1017/S0022109018001059
Publisher
Cambridge University Press (CUP): HSS Journals
Citation
HONG, Claire Yurong and LI, Frank Weikai.
The information content of sudden insider silence. (2019). Journal of Financial and Quantitative Analysis. 54, (4), 1499-1538.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/5320
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1017/S0022109018001059