For stocks in the highest IVOL quintile, six--and twelve-month post-trade returns are -5% and -8.
There appears to be a strong IVOL effect in the opportunistic purchases and sales samples: insider trades in the opportunistic samples tend to be more profitable in the high-IVOL quintiles than in the low-IVOL quintiles.
We do not use IVOL, LV and BM in the same regressions because IVOL is highly correlated with LV and BM.
Table 3 shows that opportunistic insider purchases (versus routine purchases) are positively related to future excess returns, BM and IVOL and negatively to firm size.
Next, we sort firms into quintiles of IVOL within each of these size quintiles.
We next calculate equally weighted monthly return for each of the IVOL quintile portfolios for the opportunistic and routine purchases and sales samples.
For the sample that includes penny stocks, the mean coefficient on IVOL in the univariate regression is negative (-0.
2, the coefficient on IVOL in the univariate regression is now negative (-0.
1 demonstrates that the coefficient on IVOL is negative (-0.
The preceding evidence suggests that after accounting for the presence of low-priced stocks and January seasonality, the negative relationship between IVOL and subsequent returns is robust to control for MAX and REV.
For each of the CL and CG portfolios, we average the returns across the five MAX (REV) portfolios within each of the IVOL portfolios.
Focusing first on the results in Panel A of Table IV, we find that after controlling for MAX, the difference in the value-weighted raw returns of the high and low IVOL portfolios is negative (-0.