The market evaluation of the information in directors' trading

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33 Citations (Scopus)


The purpose of this paper is to examine the propensity, characteristics and performance of directors' trades. Consistent with prior research we show that on average, directors outperform the market. However, we also find that there exist a large number of trades which do not share these abnormal share price returns and consequently have little information content. This has important consequences for market participants who use director trading activity as a signal for their own trading strategies. Using different measures of directors' trades based on trade characteristics, we report that purchases by directors are more informative than sales. In addition, the number of directors trading within a twenty day window and the percentage of the directors' holding that is being traded are both important factors in the abnormal share price performance following the trade.
Original languageEnglish
Pages (from-to)77-110
Number of pages33
JournalJournal of Business Finance and Accounting
Issue number1/2
Publication statusPublished - Mar 2002


  • market evaluation
  • directors' trading
  • share price
  • price perfomance

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