The Wall Street Journal reports on a recent study that concludes that when a company’s CEO buys a “trophy” home, investors can profit by selling or shorting the company’s stock.

The article reports that investors who short shares of after the “trophy” home purchase would reap average returns of 29% after one year, and 46% after two years.

When discussing this paper last week in class, one student raised his hand and told him that his boss gave him virtually the same advice. The boss said that if the student ever caught the boss buying a private jet, then the student should find another job because the company would not be around much longer.

Sometimes students are the best teachers.

This entry was posted on Thursday, April 19th, 2007 at 2:26 pm and is filed under Corporate Governance, Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.