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Money Buzz 4/04

Tracking insider selling and recover tax overpayments

This story appears in the April 2004 issue of Entrepreneur. Subscribe »

Insider Scoop

If you've been tracking insider sales to time your own transactions, watch out. Monitoring corporate insiders' stock selling as a market signal is growing less reliable as an investing strategy, according to H. Nejat Seyhun, a finance professor at the University of Michigan, Ann Arbor, and author of Investment Intelligence From Insider Trading (MIT Press).

While insider selling is on the rise-higher now than it's been since 1986, according to Vickers Stock Research-that trend is misleading, says Seyhun. The huge number of options granted to insiders over recent years has, in turn, increased the ratio of insider sales to purchases in the open market.

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