Do Managers Trade on Public or Private Information?

Using accounting-based (residual income) valuations, this study examines the extent to which abnormal returns after insider share trades are explained by private information versus mispricing of public information. For a sample of insider trades in the Netherlands (1999- 2008), I find that managers’ share purchase decisions are associated with positive future abnormal returns as well as equity undervaluation. Even though undervaluation results in predictable price increases, positive abnormal returns following purchases persist after controlling for fundamental valuations. Thus, this study provides evidence on the sources of managers’ personal trading gains and suggests that positive abnormal returns after insider share purchases reflect both private information and managers’ responses to market mispricing of public information

Internal control over financial reporting and managerial rent extraction: Evidence from the profitability of insider trading

__Abstract__ This paper examines the association between ineffective internal control over financial reporting and the profitability of insider trading. We predict and find that the profitability of insider trading is significantly greater in firms disclosing material weaknesses in internal control relative to firms with effective control. The positive association is present in the years leading up to the disclosure of material weaknesses, but disappears after remediation of the internal control problems. We find insider trading profitability is even greater when insiders are more likely to act in their own self-interest as indicated by auditors’ weak “tone at the top” adverse internal control opinions and this incremental profitability is driven by insider selling. Our research identifies a new setting where shareholders are most at risk for wealth transfers via insider trading and highlights market consequences of weak “tone at the top”

A proposal for a coordinated effort for the determination of brainwide neuroanatomical connectivity in model organisms at a mesoscopic scale

In this era of complete genomes, our knowledge of neuroanatomical circuitry remains surprisingly sparse. Such knowledge is however critical both for basic and clinical research into brain function. Here we advocate for a concerted effort to fill this gap, through systematic, experimental mapping of neural circuits at a mesoscopic scale of resolution suitable for comprehensive, brain-wide coverage, using injections of tracers or viral vectors. We detail the scientific and medical rationale and briefly review existing knowledge and experimental techniques. We define a set of desiderata, including brain-wide coverage; validated and extensible experimental techniques suitable for standardization and automation; centralized, open access data repository; compatibility with existing resources, and tractability with current informatics technology. We discuss a hypothetical but tractable plan for mouse, additional efforts for the macaque, and technique development for human. We estimate that the mouse connectivity project could be completed within five years with a comparatively modest budget.Comment: 41 page

Analyst information precision and small earnings surprises

This study proposes and tests an alternative to the extant earnings management explanation for zero and small positive earnings surprises (i.e., analyst forecast errors). We argue that analysts’ ability to strategically induce slight pessimism in earnings forecasts varies with the precision of their information. Accordingly, we predict that the probability that a firm reports a small positive instead of a small negative earnings surprise is negatively related to earnings forecast uncertainty, and we present evidence consistent with this prediction. Our findings have important implications for the earnings management interpretation of the asymmetry around zero in the frequency distribution of earnings surprises. We demonstrate how empirically controlling for earnings forecast uncertainty can materially change inferences in studies that employ the incidence of zero and small positive earnings surprises to categorize firms as suspected of managing earnings

Disclosures of insider purchases and the valuation implications of past earnings signals

This study examines whether disclosures of insider equity purchases on Securities and Exchange Commission (SEC) Form 4 resolve uncertainty regarding the valuation implications of reported earnings. Defining information uncertainty as ambiguity about firm value arising from low earnings precision, I predict and find that insider purchase filings trigger more positive market reactions in firms with greater information uncertainty (lower quality accruals). After controlling for future earnings changes, further find that market reactions to purchase filings are predictably associated with prior earnings changes. The strength of this effect is increasing in the magnitude of insider purchases, as well as the level of information uncertainty. Overall, these findings suggest that, in addition to signaling future earnings information, Form 4 purchase filings help investors learn about the valuation implications of past earnings signals

Children’s monetary decision making : the role of metacognition in everyday problem solving

The importance of adult and youth financial literacy in various countries is being increasingly recognised as both the spending potential and access of Singaporeans increases with the rise of affluence in society. It is therefore important to understand how children exercise logical reasoning when making monetary decisions so that we may design interventions to foster children's monetary decision making. Metacognition is an important aspect of problem solving because it includes problem-relevant awareness of one's thinking, monitoring of cognitive processes, regulation of cognitive processes, and the application of heuristics. It is especially essential in the context of solving everyday problems when problems mat be highly emergent and ill-structured. This paper discusses the role of metacognition in children's monetary decision process. Next, it argues for the importance and implications of fostering metacognition to develop children's monetary decision making processes with the introduction of a problem solving framework