How Much Insider Trading Happens in Stock Markets?

American Finance Association Annual Meeting

45 Pages Posted: 9 Feb 2021 Last revised: 21 Jun 2022

See all articles by Vinay Patel

Vinay Patel

University of Technology Sydney (UTS)

Tālis J. Putniņš

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

Date Written: January 11, 2020


We estimate that the actual prevalence of illegal insider trading is at least four times greater than the number of prosecutions. Using novel structural estimation methods that explicitly account for the incomplete and non-random detection and hand-collected data of all US prosecuted insider trading cases, we estimate that insider trading occurs in one in five mergers and acquisition events and in one in 20 earnings announcements. Key drivers of the decision to engage in illegal insider trading include stock liquidity, the value of the inside information, and the number of people in possession of the information. 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 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)

Stockholm School of Economics, Riga ( email )

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

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