Behavioral biases of informed traders: Evidence from insider trading on the 52-week high

We provide evidence on anchoring biases in insider trading using a stock's 52-week high. When stock prices are close to their 52-week highs, insiders are reluctant to purchase stocks and willing to sell them. Similarly, when stock prices are far from the 52-week highs, they are willing to buy stocks instead of selling them. This anchoring behavior is robust to controlling for insiders' contrarian strategy, firm characteristics, and trading ranges. We find that these biased insider trades are not able to predict future returns or may lead to losses to investors who follow such insider trading. Our findings suggest that insiders are prone to behavioral biases, notwithstanding their access to private information.