Do insider purchases predict stock returns?
In studies of US, UK and German filings, shares that insiders bought did better than the market on average in the days, weeks and months after the purchase. The size of that effect differs by market, period and type of trade. The studies measure averages over thousands of trades in years long past, before trading costs.
What the studies measure
Most studies compute an abnormal return: the return of a share after an insider trade, minus the return a benchmark predicts for it, such as the market or shares of similar size. Some look at the days around the trade or its publication. Others build a portfolio that holds every share insiders bought and follow it for months.
Studies of US filings
| Study | Market and period | Finding |
|---|---|---|
| Lakonishok and Lee (2001) | NYSE, AMEX and Nasdaq, 1975 to 1995 | The information in insider trades came from purchases. Sales did not predict returns. |
| Jeng, Metrick and Zeckhauser (2003) | US filings, 1975 to 1996 | A portfolio of insider purchases earned abnormal returns of about 0.4% a month. A sixth of that came in the first five days, a third in the first month. Sales earned none. |
| Cohen, Malloy and Pomorski (2012) | US filings, 1986 to 2007 | A portfolio that bought on opportunistic purchases and sold short on opportunistic sales earned value-weighted abnormal returns of 0.82% a month. Routine trades earned close to nothing. |
Routine and opportunistic trades
Cohen, Malloy and Pomorski call an insider routine if they traded in the same calendar month for at least three years in a row, for example when a bonus pays out in the same month each year. Everyone else is opportunistic. Routine trades made up over half of all insider trades in their sample. When you remove them, the trades that remain carry the information the authors measured. The same split explains part of why insider sales say less.
Studies of European filings
Jana Fidrmuc, Marc Goergen and Luc Renneboog studied directors' trades at companies on the London Stock Exchange from 1991 to 1998 (working paper, 2005; published in the Journal of Finance in 2006). Purchases of at least 0.1% of a company's market value were followed by an abnormal return of 3.12% over the announcement day and the next day, and sales by −0.37%. The authors link the larger reaction than in the US to faster reporting in the UK at the time.
André Betzer and Erik Theissen studied 2,051 insider trades in Germany from July 2002 to June 2004, from the BaFin database (working paper, 2007). In the 20 days after a trade, the abnormal return was 3.60% after purchases and −3.54% after sales. Counting from the day of the report gave similar results. In this German sample, sales carried information as well.
The limits of these findings
- Averages, not single trades. A study reports the mean over thousands of trades; one purchase can be followed by a fall.
- Old periods. The samples end in 1995, 1996, 1998, 2004 and 2007. Rules, reporting speed and markets have changed since, and past results do not show what later years bring.
- Costs. If you copy a trade, you pay a commission and the spread between bid and ask price. The abnormal returns above do not subtract those costs.
- Delay. You learn of a trade when the insider reports it. A US Form 4 is due within two business days since 2002 (SEC release 34-46421), and a European notification within three business days under MAR Article 19. Part of the return Jeng, Metrick and Zeckhauser measured came in the first five days after the trade itself.
Insider purchases on this site
Insider Trades lists the purchases and sales in five European registers and US Form 4 filings, each with a link to the filing. The methodology explains how this site scores Dutch filings and how it computes the return of buying along with each filing, and the strategies show those calculations over time. Several insiders buying at one company is the subject of what is cluster buying?, and research on trades by politicians is in do politicians beat the market?.
Checked against the regulation and the regulator’s own pages on Oct 31, 2026. This guide explains the rules; it is not legal or investment advice.
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