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Investor Attention and Insider Trading

Published online by Cambridge University Press:  30 January 2025

Sattar Mansi ,
Lin Peng Open the ORCID record for Lin Peng [Opens in a new window] ,
Jianping Qi  and
Han Shi
Sattar Mansi
Affiliation:
Virginia Tech Pamplin College of Business smansi@vt.edu
Lin Peng*
Affiliation:
City University of New York Baruch College Zicklin School of Business
Jianping Qi
Affiliation:
University of South Florida Muma College of Business jqi@usf.edu
Han Shi
Affiliation:
Louisiana State University Shreveport School of Business han.shi@lsus.edu
*
lin.peng@baruch.cuny.edu (corresponding author)
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Abstract

We identify a new mechanism of opportunistic insider trading linked to attention-driven mispricing. Insiders are more likely to sell their company’s stock during periods of heightened retail attention and more inclined to buy when attention diminishes. The results are particularly pronounced for lottery-type stocks and firms with substantial retail ownership. We demonstrate that our findings—which relate to indicators of mispricing, retail order imbalances, and Robinhood herding episodes—extend to seasoned equity issuances and cannot be solely explained by firm fundamentals. Attention-based insider trading is less likely to result in SEC enforcement actions and persists across different regulatory regimes.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , First View , pp. 1 - 41
Copyright
© The Author(s), 2025. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We thank Brad Barber, Daniel Bradley, Thierry Foucualt (the editor), Ryan Israelsen (the referee), Laurie Krigman, Michelle Lowry, Christos Pantzalis, Dahlia Robinson, Ninon Sutton, and seminar and conference participants at the FMA Doctoral Consortium, the FMA Asian/Pacific Conference, the World Finance Conference, the University of South Florida, and Southern Illinois University–Edwardsville for helpful comments and suggestions. We also acknowledge research support from Baruch College, the University of South Florida, and Virginia Tech. Any errors are the sole responsibility of the authors.

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