When Insider Trading Is Positive

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 Moniz identifies 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.

Comments

[notsosmart:]

its not the buying its the selling that should clue you in.

2008 Aug 05 10:49 AM

[User 208427:]

WRONG! Often times execs have to sell to balance out their portfolio and for tax reasons. Selling often just means estate planning.

2008 Aug 05 02:40 PM

[User 208427:]

Buying is always a great sign!!!

2008 Aug 05 02:40 PM