I devoted an entire chapter in Tradestream to an investing strategy that mimicked insider trading. You can check out my insider trading dashboard.
Data’s been really good but the methodology is being question by new research. While previous research (specifically, that done by Seyhun in his book Investing Intelligence from Insider Trading) focused on buckets of insiders (C-level execs, VP’s, external board members, etc), new findings show that investors can get even more granular.
Like tracking individual insiders granular.
In Decoding Insider Information, Cohen et. al. finds that by identifying profitable, opportunistic (individual) insiders, investors can create a portfolio that yields value-weighted abnormal returns of 82 basis points per month.
Instead of grouping insiders together, this study filters out regular, noisy insider trading, of no value to investors trying to find someone trading on better information. By looking at insiders who trade opportunistically (every once-in-a-while), piggybacking strategies can mimic just those trades that are imbued with meaningful information (assume the insider knows something.)
—> Read Decoding Insider Information (American Journal of Finance)