When corporate insiders buy and sell shares of the company they work for, some people feel compelled to follow.
The rationale is simple: no one knows a company better than an insider. Therefore, they’re more likely to buy if things are getting better and they’re more likely to sell if they think things will get worse.
Unfortunately, the data doesn’t seem to support this.
Jim Stack of Investech (via Barry Ritholtz) has created this annotated chart of the Dow Jones Industrial Index.
It includes some headlines of insider trading activities.
The chart speaks for itself.
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