Are Insiders' Trades Informative?

47 Pages Posted: 11 Sep 1998 Last revised: 4 Apr 2022

See all articles by Josef Lakonishok

Josef Lakonishok

University of Illinois at Urbana-Champaign; National Bureau of Economic Research (NBER)

Inmoo Lee

KAIST College of Business

Date Written: July 1998


We document insider trading activities of all companies listed on the NYSE, Amex, and Nasdaq exchanges during the 1975-1995 period. Insider trading is common, and in more than half the sample firms, there is at least some insider activity in a given year. In general, very little market movement is observed when insiders trade and when they report their trades to the SEC. Insiders in aggregate are contrarian investors. However, they predict market movements better than simple contrarian strategies. Insiders also seem to be able to predict cross-sectional stock returns. The result, however, is driven by insider's ability to predict returns in smaller firms. In addition, insider purchases are more informative than insider sales.

Suggested Citation

Lakonishok, Josef and Lee, Inmoo, Are Insiders' Trades Informative? (July 1998). NBER Working Paper No. w6656, Available at SSRN:

Josef Lakonishok (Contact Author)

University of Illinois at Urbana-Champaign ( email )

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National Bureau of Economic Research (NBER)

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Inmoo Lee

KAIST College of Business ( email )

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Korea, Republic of (South Korea)