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

Author

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  • Oenschläger, Eike
  • Möllenhoff, Steffen

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.

Suggested Citation

  • Oenschläger, Eike & Möllenhoff, Steffen, 2025. "Insider filings as trading signals — Does it pay to be fast?," Finance Research Letters, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:finlet:v:72:y:2025:i:c:s1544612324015435
    DOI: 10.1016/j.frl.2024.106514
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    More about this item

    Keywords

    Insider trading; Directors’ dealings; Market efficiency; Trading signal;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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