Select Page

Insiders Are Sending A Pretty Clear Signal About The Stock Market (And The Economy)

Insiders Are Sending A Pretty Clear Signal About The Stock Market (And The Economy)

Insiders Are Sending A Pretty Clear Signal About The Stock Market (And The Economy)

Authored by Jesse Felder via TheFelderReport.com,

The following is an excerpt from a recent Market Comment featured on The Felder Report PREMIUM

As most readers should be well aware, one of the things I monitor most closely is insider buying and selling. Nobody knows more about the bullish and bearish developments of a business and its valuation relative to those developments than the company’s top executives. Now some believe that, while insider activity may sometimes be a good indication of future price movements in individual stocks, in aggregate it doesn’t have any meaning at all. In addition, many suggest that, while insider buying may be predictive at times, insider selling is not. Both of these positions, however, are contradicted by the data.

As Nejat Seyhun, Professor of Finance at the University of Michigan, has demonstrated in his book, Investment Intelligence From Insider Trading, the aggregate selling-to-buying ratio over certain periods of time has a very good track record at predicting future returns in the stock market. In his words, “Aggregate insider trading predicts aggregate stock returns.” Furthermore, “Aggregate insider trading predicts changes in future economic growth up to two years ahead.” So not only are insiders better market strategists than those on Wall Street, they are also better economists.

This should make intuitive sense. Who has a better read on both the stock market and the economy than the amalgamation of those top executives in the country with the confidence to not merely make a public forecast but actually put their money where their mouths are?

As to those who say, ‘there are many reasons for an insider to sell; there’s only one reason to buy,’ again here is Mr. Seyhun: “both purchases and sales seem to be informative. The future stock price movements following insider purchases exceed the average stock price movements. Also the future stock price movements following insider sales fall short of the average stock price movements.”

Certainly, we have seen this play out over the past year. The aggregate insider buying just over a year ago has proved very prescient as to the direction of the stock market, the leadership of the rebound in stock prices and the turnaround in the economy so far. However, when we look at the recent data (provided by InsideArbitrage.com), it’s immediately apparent that the top executives (along with directors and 10% shareholders) have rarely been as aggressive in selling, or disinterested in buying, as they are today.

In light of Seyhun’s findings noted above, this relative bearishness on the part of insiders in aggregate would seem to suggest that stock prices are likely to fall short of euphoric expectations over the next year or so. On top of that, the economy could begin to disappoint on a similar time frame, as well. Don’t say they didn’t warn you.

Tyler Durden
Fri, 04/16/2021 – 06:30


This post has been republished with permission from a publicly-available RSS feed found on Zero Hedge. The views expressed by the original author(s) do not necessarily reflect the opinions or views of The Libertarian Hub, its owners or administrators. Any images included in the original article belong to and are the sole responsibility of the original author/website. The Libertarian Hub makes no claims of ownership of any imported photos/images and shall not be held liable for any unintended copyright infringement. Submit a DCMA takedown request.

-> Click Here to Read the Original Article <-

About The Author

Tyler Durden

Zero Hedge's mission is to widen the scope of financial, economic and political information available to the professional investing public, to skeptically examine and, where necessary, attack the flaccid institution that financial journalism has become, to liberate oppressed knowledge, to provide analysis uninhibited by political constraint and to facilitate information's unending quest for freedom. Visit https://www.zerohedge.com

Leave a reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Welcome

Bringing together a variety of news and information from some of today’s most important libertarian thought leaders. All feeds are checked and refreshed every hour and pages auto-refresh every 15 minutes. External images are deleted after 30 days.

Time since last refresh: 0 second

Publish Your Own Article

Follow The Libertarian Hub

 

Support Our Work

Support the Libertarian Hub by tipping with Bitcoin!

Weekly Newsletter

Newsletter Signup

Subscribe to our newsletter to receive a weekly email report of the top five most popular articles on the Libertarian Hub!

Weekly Newsletter SignupTop 5 Stories of the Week

Subscribe to our newsletter to receive a weekly email report of the top five most popular articles on the Libertarian Hub!