Insider filings as trading signals — Does it pay to be fast?

Eike Oenschläger and Steffen Möllenhoff

Finance Research Letters, 2025, vol. 72, issue C

Abstract: We test a trading strategy based on SEC Form 4 insider trading filings in the post Sarbanes–Oxley Act period. Using intraday data, we analyze whether a prompt reaction to the announcement would earn abnormal returns. We find positive but lower abnormal percentage returns than in previous studies for short holding periods, but they vanish and even become negative when limiting the tradable dollar amount for each trading signal to a reasonable size. Moreover, we find that the returns in our setup are negatively correlated with stock liquidity, almost negating a potentially profitable and scalable trading strategy even before considering transaction costs.

Keywords: Insider trading; Directors’ dealings; Market efficiency; Trading signal (search for similar items in EconPapers)
JEL-codes: G12 G14 G30 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:72:y:2025:i:c:s1544612324015435

DOI: 10.1016/j.frl.2024.106514

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