How Much Insider Trading Happens in Stock Markets?

American Finance Association (AFA) Annual Meeting

59 Pages Posted: 9 Feb 2021 Last revised: 9 Sep 2023

See all articles by Vinay Patel

Vinay Patel

University of Technology Sydney (UTS)

Tālis J. Putniņš

University of Technology Sydney (UTS); Digital Finance CRC; Stockholm School of Economics, Riga

Date Written: January 11, 2020


We estimate that the prevalence of illegal insider trading is at least four times greater than the number of prosecutions. Using structural estimation methods that account for incomplete non-random detection and all US prosecuted insider trading cases, we estimate that insider trading occurs in 1-in-5 mergers and acquisitions and in 1-in-20 earnings announcements. We find that insider trading is more likely when the information is more valuable, more people are in possession of the information, and in more liquid stocks. Detection and prosecution are more likely when there are abnormal trading patterns and more regulatory resourcing.

Keywords: insider trading, prosecution, detection controlled estimation, M&A, earnings

JEL Classification: G14

Suggested Citation

Patel, Vinay and Putnins, Talis J., How Much Insider Trading Happens in Stock Markets? (January 11, 2020). American Finance Association (AFA) Annual Meeting, Available at SSRN: or

Vinay Patel (Contact Author)

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007

Talis J. Putnins

University of Technology Sydney (UTS) ( email )

PO Box 123
+61 2 9514 3088 (Phone)

Digital Finance CRC ( email )

Stockholm School of Economics, Riga ( email )

Strelnieku iela 4a
Riga, LV 1010
+371 67015841 (Phone)

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