Working paper; first version September 2007; this version July 2009We examine whether directors of UK companies can time the market when they trade in their
own-company stock, using a comprehensive dataset on all directors’ trades from 1994-2006 for
FTSE All Share companies and AIM-listed companies. We find that in the 20 days before a
director’s buy (sell) trade prices fall (rise) such that abnormal returns are -2.48% (+2.17%); in
the 20 days after a directors’ buy (sell) trade, abnormal returns are 1.55% (-1.19%). We go on
to examine whether the category (executive or non-executive) and the gender (male or female)
of the director differ in the information they posses about their own firms, how they trade on
this information and how markets respond to their trades. We test both the information
hierarchy hypothesis, that more senior corporate insiders have access to better information, and
also a characteristics-based trading hypothesis, that the director’s trading pattern depends on
the gender of the director. We find some support for the information hierarchy hypothesis, but
no difference in the trading patterns and stock market response to directors’ gender differences,
after conditioning on the category of director
