Previous work examined the long-run profitability of strategies mimicking the trades of company directors in the shares of their own company. However, the evidence regarding returns during the month containing the insider trade was ambiguous. The current paper examines patterns in abnormal returns in the days around these trades on the London Stock Exchange. We find movements in returns that are consistent with directors engaging in short-term market timing. On a net basis, however, abnormal returns all but disappear once "round-trip" (spread) transactions costs are taken into account. We also report that some types of trades have superior predictive content over future returns. In particular, medium-sized trades are more informative for short-term returns than large ones, consistently with Barclay and Warner's (1993) "stealth trading" hypothesis.
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