Signaling Approach

AAA

DEFINITION of 'Signaling Approach'

The idea that insiders have information not available to the market. Moves made by insiders can signal information to outsiders and change the stock price.

INVESTOPEDIA EXPLAINS 'Signaling Approach'

The thinking goes that if a high level executive, such as a CEO, is selling, he or she is probably doing so for a reason that you, as the public, don't know yet, so you should get out also. The same is true for the opposite. If an insider is buying stocks in his or her company, it signals outsiders to also buy based on the idea that the insider knows more than he or she is letting on to the public.

RELATED TERMS
  1. False Signal

    In technical analysis, a false signal refers to an indication ...
  2. Insider

    A director or senior officer of a company, as well as any person ...
  3. Multiples Approach

    A valuation theory based on the idea that similar assets sell ...
  4. Dividend Signaling

    A theory that suggests company announcements of an increase in ...
  5. Insider Information

    A non-public fact regarding the plans or condition of a publicly ...
  6. Insider Trading

    The buying or selling of a security by someone who has access ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Options & Futures

    When Insiders Buy, Should Investors Join Them?

    Insider tracking can inform your investment strategy, but it requires research and a level head. Find out what to look for.
  2. Options & Futures

    Can Insiders Help You Make Better Trades?

    Find out why the trading activity of owners and executives can be a valuable trade-confirmation tool.
  3. Charts & Patterns

    Why These Are 2015's Most-Promising Bank Stocks

    Which bank stocks should offer the best bang for your buck in 2015? Possibly these, so read on.
  4. Active Trading Fundamentals

    20 Rules To Trade More Professionally

    Break free from the pack and join the professional minority with an approach that raises your odds for long term prosperity.
  5. Chart Advisor

    Trade Healthcare Providers with this ETF

    In good times and bad times one of the best sectors for retail investors to look into is the healthcare providers. Here's an ETF to consider.
  6. Fundamental Analysis

    Is Apple's Stock Over Valued Or Undervalued?

    Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only systematic risk. Applying Apple, we get annual expected return of about ...
  7. Trading Strategies

    Trading On The Psychology Of Round Numbers

    Price action around big round numbers, like 10, 100 and 1000 set up special trading opportunities that take advantage of shifting crowd psychology.
  8. Chart Advisor

    Commodity Traders Are Using Momentum To Profit From These Stocks

    Active traders are drawn to momentum strategies. These momentum winners of 2015 are worth a trader's second look.
  9. Trading Strategies

    How To Make The Most of Fibonacci Grids

    Build your Fibonacci skills by finding the longest price swing on your chart of interest and placing a grid over the trend. Repeat at shorter intervals.
  10. Trading Strategies

    Day Trading: Top Scenarios To Take Profits

    Three ways to take profits while day trading, based on price movement and what the asset is doing that day.

You May Also Like

Hot Definitions
  1. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  2. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  3. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  4. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  5. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  6. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
Trading Center