What happens to a company's stock price when the CEO buys a mansion? It heads south, according to a study.

Academics from Stern School of Business and the W.P.Carey School of Business based their findings on a database of nearly every top executive from the Standard & Poor's 500 Index.

Their study, Where are the shareholders' mansions? CEOs' home purchases, stock sales, and subsequent company performance, found that when CEOs acquired very large properties, the stock underperformed. The authors claim this was "a result consistent with large mansions and estates being proxies for CEO entrenchment."

Similarly, the stock price went down when CEOs sold shares or exercised options to pay for the house. When the CEO used other methods of financing but sold no equity, it was ok.

"The retention of company shares simultaneous with a new home purchase, despite the presence of an evident personal liquidity need, appears to send a signal of commitment by a CEO to his company".

What does that mean for investors? For a start, check what's happening in the real estate market and the internal trades before you buy into a company.