Overreaction or Fundamentals: Some Lessons from Insiders' Response to the Market Crash of 1987

  • Author(s): H. NEJAT SEYHUN
  • Published: Apr 30, 2012
  • Pages: 1363-1388
  • DOI: 10.1111/j.1540-6261.1990.tb03719.x


This paper shows that i) the Crash was a surprise to corporate insiders; ii) insiders became buyers of stock in record numbers immediately following the Crash; iii) stocks that declined more during the Crash were also purchased more by insiders; and iv) stocks that were purchased more extensively by insiders during October 1987 showed larger positive returns in 1988. The overall evidence suggests that overreaction was an important part of the Crash.

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