Aggregate Insider Trading in the S&P 500 and the Predictability of International Equity Premia
Posted: 24 Jan 2023 Last revised: 18 Mar 2023
Date Written: February 6, 2023
We show that aggregate insider trading (AIT) in the S&P 500 is a reliable predictor of the U.S. equity premium, while AIT outside the S&P 500 seems to be uninformative. In an international setting, we find that AIT based on S&P 500 insiders predicts international equity premia. Contrary to our U.S. based measure of AIT, we do not find any predictive content of domestic AIT for international equity premia. The informational content of AIT of S&P 500 insiders for U.S. and international equity premia stems from the insiders’ ability to forecast cash flow news in- and outside the U.S.
Keywords: equity risk premium; aggregate insider trading; predictive regression; informed traders
JEL Classification: D82; G11; G12; G14; G15
Suggested Citation: Suggested Citation