Insider and Short Seller Info Boosts Stock Returns in High Asymmetry Markets
The strategy of combining information from short sellers and corporate insiders can help investors make profitable decisions. By looking at how these groups trade stocks, researchers found that this strategy can lead to significant and meaningful returns for at least a year. The success of this approach is mainly due to the difference in knowledge between informed and uninformed investors. It works best in situations where there is a lot of information asymmetry and during times of economic growth. This study suggests that investors interested in companies with high information asymmetry can use data on short interest and insider trading to guide their investment choices.