The January Effect and Aggregate Insider Trading.

This study investigates the seasonal pattern of aggregate insider trading to help disti nguish between two competing explanations for the seasonal pattern of security returns. The first potential explanation examined is that t he January effect arises from predictable changes in turn-of-the-year demand for securities. The second potential explanation examined is that the January effect represents compensation for the higher risk of trading against informed traders at the turn of the year. Copyright 1988 by American Finance Association.