Examine the figure85 that follows, which presents cumulative abnormal returns both before and after dates on which insiders buy or sell shares in their firms. How do you interpret it? What are we to make of the pattern of CARs before and after the event date?

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Cumulative daily average prediction errors 4% 396 296 196 0 Sales Purchases -2% -200 -100 0 100 200 300 Event day relative to insider trading day