What do you think probably happens insider trades

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Reference no: EM131831456

In the United States, high-level corporate officials have to publicly state when they buy or sell a large number of shares in their own company.

They have to make these statements a few days after their purchase or sale. What do you think probably happens (choose a, b, c or d) when newspapers report these true "insider trades"?

(Note: The right answer according to theory is actually true in practice.)

a. When insiders sell, prices rise, since investors increase their demand for the company's shares.

b. When insiders sell, prices fall, since investors increase their demand for the company's shares.

c. When insiders sell, prices fall, since investors decrease their demand for the company's shares.

d. When insiders sell, prices rise, since investors decrease their demand for the company's shares.

Reference no: EM131831456

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