Do Insiders Beat the Market? What the Evidence Actually Says

What the research says

The academic literature on insider trading performance is extensive. The foundational study by Seyhun (1988) found that insiders do possess information advantages that are reflected in abnormal returns following open-market purchases. Subsequent research by Lakonishok and Lee (2001) confirmed that insider purchases - particularly by CEOs and other top executives - predict future stock returns over 6-to-12 month horizons.

More recent research by Cohen, Malloy, and Pomorski (2012) identified a distinction between "routine" insiders (who trade in regular, predictable patterns, often for liquidity reasons) and "opportunistic" insiders (who trade irregularly, potentially based on information). They found that opportunistic insider purchases generated significant abnormal returns, while routine trades did not.

A broad meta-analysis of the literature suggests that open-market insider purchases outperform the market by roughly 3-8% per year on average, measured from the disclosure date - not the trade date. However, this average conceals enormous variation across insiders, companies, and market conditions.

The disclosure date vs trade date distinction

A crucial distinction in measuring insider performance is whether you measure from the trade date or the disclosure date. Measuring from the trade date flatters the signal significantly - by definition, if you could only act once you knew about the trade, the earliest possible action date is the disclosure date.

This matters because some of the price movement associated with insider purchases occurs between the trade date and the disclosure date. A Form 4 filed two days after the trade may show an insider who bought at $50 when the stock is now $52. An investor acting on the disclosure at $52 has a meaningfully different starting point.

Disclosyr measures and displays returns from the disclosure date consistently across all insiders. This is a more conservative and realistic methodology. It answers the question: "if you had acted the day you learned about this trade, how would you have done?" - not "how would you have done if you had somehow known before the disclosure?"

Which insiders outperform

Not all insiders outperform the market. The literature and empirical data consistently point to several characteristics of outperforming insider purchases:

• Seniority: CEO and CFO purchases historically outperform purchases by lower-level executives. Top executives have broader information access than directors or vice presidents.
• Transaction size: Large open-market purchases tend to be more informative than small ones. An executive buying €5 million of their own company signals stronger conviction than buying €50,000.
• Irregularity:Purchases that deviate from the insider's normal pattern - first purchase in years, or unusually large relative to history - tend to be more predictive.
• Corroboration: Purchases confirmed by multiple insiders (cluster buying) are stronger signals than individual transactions.
• Historical track record: Some insiders consistently buy before good news. Others are persistently unlucky or uninformative. Track records are persistent enough to be somewhat predictive.

Why insider selling is different

The research on insider selling is much weaker than on insider buying. Insiders sell for many non-information reasons - diversification, liquidity needs, estate planning, tax obligations, or RSU vesting. The informational content of a sale is therefore much lower than the informational content of a discretionary purchase.

This is why Disclosyr's signal detection focuses primarily on the buy side. Sales are shown in the feed and may be relevant in context (a CEO selling 90% of their position is different from selling a small percentage), but they do not trigger buy-side signal badges in the same way.

How Disclosyr measures performance

Disclosyr calculates return from the disclosure date to a fixed window - 1 month, 3 months, 6 months, 1 year, and 3 years. Each period is shown separately, allowing you to see at which horizon a particular insider's track record is strongest.

The leaderboard ranks insiders by 1-year return by default, but Pro subscribers can filter by any return window and see win rates, median returns, and returns relative to the benchmark. Full methodology is published on the methodology page.

View the current leaderboard: Insider performance rankings →