LogFAQs > #936054147

Super ignorant question.

It seems that whenever an insider buys shares of their companys stock, it attracts attention which in turn causes the stock to rise (people see an insider investing heavily which causes them to think something big will happen, so they too feel compelled to invest). Maybe the stock wont go up the same day, but within a week or so.

Knowing that, cant the insiders use this to their advantage? They invest, take a hit as the value goes down at first, and right before it goes up, another insider (whom theyre in cahoots with) invests an even larger amount. So large, that they cover the loss by the insider and then some.

This assumes that an insiders investment is enough to raise the value of a stock, and by a margin significant enough for the second investor to get it all back.