What Do the Researchers Say?

1. When executives bought shares in their own companies, the stock tended to outperform the total market by 8.9% over the next 12 months. Conversely when they sold shares, the stock underperformed the market by 5.4% (Nejat Seyhun, a renowned professor and researcher in the field of insider trading at the University of Michigan)
2. Insider trading is significantly correlated with stock price run-ups implying that insider (i.e., informed) trades affect price discovery differently than non-insider (i.e., uninformed) trades (Chakravarty and McConnell 1997, Financial Management, 26, p. 18-34)
3. A positive relationship is observed between insider transactions and future stock returns (Iqbal and Shetty 2002, Quarterly Review of Economics and Finance, 42 (1) p. 41-57)