Examine the accompanying figure, which presents cumulative abnormal returns (CARs) both before and after dates on which insiders buy or sell shares in their firms. How do you interpret this figure? What are we to make of the pattern of CARS before and after the event date?

SOURCE: NeJat F Insiders, Profits, Costs of Trading and mic: 16 (1986), pp. 189-212. 4 3 2 Cumulative daily average prediction errors (%) - 1 Sales Purchases -2 -200 -100 O 100 200 300 Event day relative to insider trading day