Stocks Swing on CEO House Size

By Sam Gale Rosen,  Newser Staff
Posted Apr 13, 2007 1:55 PM CDT
A bad sign?   ((c) kurmbox)

(Newser) – Don't buy stock in a company whose CEO lives in a huge house, a new study says.  CEOs who move into regular-sized digs—5,600 square feet for the typical company headsee their company's stock jump an average 6% the following year. Those who go palatial10,000 square feet or morewatch stocks dip by an average of 1.7%.

Authors Crocker Liu and David Yermack speculate that a big-ticket purchase may be a signal of an exec who is overly secure in her position. Or it may point to something more insidious, like a pretext for dumping shares. Bottom line for investors: When your neighborhood CEO decides to move on up, it's time to start shorting.