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. Multiples Approach

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

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

    A director or senior officer of a company, as well as any person ...
  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. How can I spot trading opportunities looking at year-to-date (YTD) performance?

    Trading opportunities on the long side can be spotted by looking at stocks with the worst year-to-date (YTD) performance, ... Read Full Answer >>
  2. How does Net Operating Profit After Tax give a clearer view of the operating efficiency ...

    Net operating profit after tax (NOPAT) gives a clearer view of the operating efficiency of a company. While NOPAT is a measure ... Read Full Answer >>
  3. Which is better: dollar cost averaging or value averaging?

    Historical comparisons seem to indicate that value averaging (VA) tends to outperform dollar cost averaging (DCA), offering ... Read Full Answer >>
  4. Why is the Nasdaq more volatile than the NYSE?

    The Nasdaq exchange does tend to regularly evidence more volatility than its major competitor, the New York Stock Exchange ... Read Full Answer >>
  5. How can I use Bollinger Bands® to spot options trading opportunities?

    Traders can use Bollinger Bands in a couple of different types of trading strategies. The most common strategy is using Bollinger ... Read Full Answer >>
  6. How do prepaid expenses affect liquidity ratio calculations?

    Prepaid expenses generally increase the value of liquidity ratios because a prepaid expense is categorized as a current asset ... Read Full Answer >>
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. Chart Advisor

    Stocks Breaking to Downside - Time to Sell?

    These stocks have broken patterns or trendlines to downside, indicating more selling could be coming.
  4. Chart Advisor

    3 Ways To Trade The Bounce In Coal

    News from the Supreme Court has caused active traders to turn their attention to the coal markets. We'll take a look at how to trade the bounce.
  5. Chart Advisor

    How Investors are Profiting from Cyber Crime Fear

    An ETF that has seen significant gains this year in the growing field of cyber security, and the threat and fear of cyber attacks and cyber crime.
  6. Trading Strategies

    Why Volatility Is Your Friend

    Instead of looking at falling share prices as something negative, investors should view it as an opportunity to acquire ownership in fundamentally strong companies at low prices.
  7. Chart Advisor

    Buy These Stocks on The Pullback

    These four stocks are in upward sloping trend channels and have recently pulled back toward the bottom of the channel, providing a buying opportunity.
  8. Technical Indicators

    Using Bullish Candlestick Patterns To Buy Stocks

    These five popular candlestick chart patterns signal a bullish reversal in downtrend.
  9. Chart Advisor

    3 Ways To Trade Oil's Move Lower

    The spot price of oil is facing major resistance. We'll take a look at a few products that you can see to profit from the move.
  10. Trading Strategies

    Profitable Long-Term Consolidation Patterns

    Long-term consolidation patterns set up high reward opportunities for patient market players.

You May Also Like

Hot Definitions
  1. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  2. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  3. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  4. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  5. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  6. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!