Signaling

Overview

Signaling happens when insiders in a company take actions or make statements that possibly reveal some inside information about the health and prospects of the company.

Common Signals

• Insider Selling - occurs when employees of the company, and especially the executives, sell large amounts of their holding of company stock
• Company cuts (or raises) dividend - is thought to indicate that the executives of the company are reducing dividends because they feel that the propects for the company have gone down, or that risk is elevated.