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This paper explores the time-varying institutional investor preference for lottery-like stocks. On average, institutional investor holdings reflect an aversion to lottery-like stocks. However, I find that an institutions' aversion to lottery-like stocks is reduced when investor sentiment is low. Moreover, I find that during low sentiment periods, institutional investors have abnormally high trading profits in more positively skewed stocks. These results suggest that institutions reduce their aversion toward lottery-like stocks during low sentiment periods to profitably trade in lottery-like stocks.

We explore similarities in insider trading as a proxy for information flows. We observe that corporate insiders cluster trades around those of other insiders at their firm, especially around trades of insiders with whom they work closely. Clustering is greater when informational advantages are larger: during periods of low investor attention, high uncertainty, and high information asymmetry. We also document that clustered insider purchases are followed by abnormal returns in excess of 2% during the subsequent month. Our results are consistent with informed trading, which could result from information sharing among corporate insiders.

Purpose This study aims to examine the information transfer effects of customers’ credit rating downgrades on supplier firms. Design/methodology/approach In this study, the authors use suppliers’ cumulative abnormal returns around customers’ credit rating downgrade events to identify how shocks to customer credit impact supplier equity prices. The authors also incorporate ordinary least squares and weighted least squares regressions regression analysis of the determinants of supplier market response to customer downgrades. Findings The authors find that customer credit rating downgrades present significant negative shocks to the stock prices of supplier firms. Moreover, the authors show that the information transfer effects are determined by both firm- and industry-level factors, including the market anticipation of downgrades, the strength of the customer–supplier linkage, the industry rivals’ reactions to the downgrades and investor attention. The authors also find that the likelihood that a supplier will receive a rating downgrade is significantly higher following its primary customer firm’s downgrade. Originality/value To the best of the authors’ knowledge, this paper is the first to explore the information transfer effects of credit rating downgrades on primary stakeholders within the supply chain. The authors document that customer–supplier networks have valuable implications for the spillover effect across debt and equity holders. Information about customers’ financial stress is incorporated into suppliers’ equity prices outside of the context of customer bankruptcy.