The Perils of Chasing Bonuses: There is strong evidence for the existence of either insider trading or insider inspired trading prior to bonus announcement
There is clear evidence that the price tends to move strongly upward from between 15 - 20 weeks before a bonus announcement. This is the approximate point at which most boards of directors make a decision regarding a future bonus issue.
If the news of a forthcoming bonus is kept watertight, there should be no movement at all until the announcement is made. The fact that on average, stock experience a residual movement of between 10 - 12 percent in the last three to four months before an announcement means that there must be either some insider trading or insider-inspired trading taking place.
The amount of movement is not that large on an average but this average conceals the fact that many stocks experience considerably larger movement than this and these are the stocks in which insiders or their "friends" stand to make a lot of money.
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