DO INSIDERS CLUSTER TRADES WITH COLLEAGUES? EVIDENCE FROM DAILY INSIDER TRADING

We explore similarities in insider trading as a proxy for information flows. We observe that corporate insiders cluster trades around those of other insiders at their firm, especially around trades of insiders with whom they work closely. Clustering is greater when informational advantages are larger: during periods of low investor attention, high uncertainty, and high information asymmetry. We also document that clustered insider purchases are followed by abnormal returns in excess of 2% during the subsequent month. Our results are consistent with informed trading, which could result from information sharing among corporate insiders.