The Dollar Profits to Insider Trading

76 Pages Posted: 19 Dec 2016 Last revised: 10 Jan 2019

See all articles by Peter Cziraki

Peter Cziraki

University of Toronto - Department of Economics; Tilburg Law and Economics Center (TILEC)

Jasmin Gider

Tilburg University - School of Economics and Management

Date Written: December 12, 2018


This paper studies trade quantities and dollar profits to insider trading, to investigate whether corporate insiders can exploit their superior information about the firm. We find that dollar profits are economically small for a typical insider, the median insider earning abnormal profits of $464 per year. Variables that predict percentage returns fail to predict dollar profits, suggesting that insiders with the largest superior information do not turn this advantage into profits. Insiders who trade infrequently make high returns, while insiders who trade frequently make large dollar profits. We exploit a legally-imposed discontinuity to construct a new measure of insiders’ intentions, which predicts both dollar profits and returns. This measure successfully identifies a small subset (0.5%) of insiders whose profits are significantly higher with a median of $2,500 per year. Finally, we use variation in SEC budgets over time to assess whether monitoring can explain the different distribution of returns and profits. Our work highlights that using dollar profits as opposed to percentage returns offers contrasting evidence on a number of questions about insider trading. We argue that profits are a more precise measure for testing agency theories.

Keywords: insider trading, trading profits, corporate governance, executive compensation

JEL Classification: G14, G34, M52

Suggested Citation

Cziraki, Peter and Gider, Jasmin, The Dollar Profits to Insider Trading (December 12, 2018). TILEC Discussion Paper No. DP 2017-005. Available at SSRN: or

Peter Cziraki (Contact Author)

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S3G7
+1 416 946 3298 (Phone)


Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE

Jasmin Gider

Tilburg University - School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE

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