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Insiders, at Least, See Reason to Smile
are considered strongly bullish.

As of March 14, the most recent date for which he could obtain data, he says his Insider Trading Index stood at a very bullish 71.5, well above the 55 threshold.

He warns, however, that his index is not a reliable short-term tool for market timing. Insiders face a number of legal and regulatory penalties if they buy or sell their companies’ shares immediately before good or bad news is reported. As a result, they tend to make long-term rather than short-term bets on their companies.

But Professor Seyhun says he has found that his index has a statistically significant ability to forecast where the stock market will be 12 months down the road. The current reading thus suggests that the stock market will move higher over the next year.

OF course, no forecasting tool is perfect. At the end of March last year, for example, the professor’s index gave a bullish reading of 58.1, but the overall stock market, as measured by the Dow Jones Wilshire 5000 index,

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