Blogs & Comment

Using insider-trading signals

Studies show insider trading is a useful guide for investment decisions. But some insider transactions are better signals than others. A recent study by Giamouridis, Liodakis, and Monizidentifies those with the “highest possible information content” and shows how to use them to develop portfolio strategies that have economically and statistically significant performance.
The positive insider-trading signals include: i) large dollar amount purchased (up to a point), ii) several purchases made over previous three months, iii) several insiders buying in same period, iv) insider buying after a positive earnings announcement, v) insiders buying a value stock vs. a growth stock, vi) buying by senior executives in a small company, and vii) buying when a company has a stock buyback program.