Does Insider Buying Predict Stock Returns?
Partly, according to published research: insider purchases have been followed by modestly better returns on average, while insider sales have not told researchers much. The effect is stronger in smaller companies and weaker for purchases that follow a routine, so a filing is a clue and not a forecast.
This site holds no forward-return study of its own, so the answer below rests on three academic papers (linked and described with their limits) and on the live data in the Insider Buying Tracker.
What counts as insider buying?
Company officers, directors and 10% owners report their own trades on a Form 4 within two business days. The glossary entry explains the form; how to read a 13F shows how it differs from the quarterly fund report.
The tracker counts only open-market purchases (Form 4 transaction code P) and ignores option exercises, stock awards and gifts, because those are not an insider spending cash. It ranks stocks by how many different insiders bought, which is the site's definition of cluster buying.
What does the research say about insider purchases?
| Study | What it found | Limits |
|---|---|---|
| Lakonishok and Lee, Review of Financial Studies, 2001 | Covering NYSE, AMEX and Nasdaq stocks from 1975 to 1995, the informative part is insider purchases; sales show no predictive ability. Market moves around insider trades are generally small, and the predictive result comes mainly from smaller firms. | Old sample; effect concentrated where trading is thin and costly. |
| Jeng, Metrick and Zeckhauser, NBER working paper 6913 (later in the Review of Economics and Statistics, 2003) | Using insider transactions from 1975 to 1996, a portfolio that mimics insider purchases earned about 0.40% a month of abnormal return in the working paper; the sale portfolio earned none. | Working-paper figure; assumes you buy at the filing, and sample ends in 1996. |
| Cohen, Malloy and Pomorski, Journal of Finance, 2012 | Routine traders (those who trade on a calendar pattern) carry essentially no signal. Opportunistic traders, whose trades are not predictable, were followed by value-weighted abnormal returns of about 82 basis points a month. | Sorting insiders needs years of history on each person; academic portfolios ignore costs. |
None of these is recent enough to show how the effect behaves in today's market, which is another reason to read the result as a tilt, not a rule.
Why are purchases a stronger signal than sales?
Insiders sell for many reasons: taxes, diversification, a house, a pre-scheduled plan. They buy for one reason, which is that they expect the shares to rise. That asymmetry is why every study above finds more in purchases.
It is also why a long list of sellers at a company whose executives are paid in stock tells you little.
What does insider buying look like right now?
As of the tracker's October 25, 2026 refresh, 64 of the 503 tracked stocks show at least one open-market purchase in their most recent filings. The five with the most different buyers:
| Stock | Different insiders buying | Dollars bought | Latest purchase |
|---|---|---|---|
| Simon Property Group (SPG) | 11 | $460,716 | Sep 30, 2026 |
| Norwegian Cruise Line (NCLH) | 7 (10 purchases) | $29.2 million | Jun 2, 2026 |
| KKR | 4 | $15.6 million | Mar 4, 2026 |
| Boston Scientific (BSX) | 4 (6 purchases) | $9.5 million | Aug 25, 2026 |
| Aptiv (APTV) | 4 (7 purchases) | $8.6 million | Aug 13, 2026 |
The two ends of the table show why a count is not a verdict. Simon Property's 11 directors and officers bought about $42,000 each on average, while seven Norwegian Cruise Line insiders put in $29.2 million. Both are real clusters, yet they are very different in conviction.
Source: this site's Insider Buying Tracker, refreshed October 25, 2026. Each stock's data is capped at its 12 most recent insider filings, so the look-back differs by company.
What are the limits of insider buying as a signal?
- It is an average, not a promise. The studies describe portfolios of many purchases; any single one can fall.
- Timing. The academic portfolios assume you could trade at the filing, and part of the abnormal return arrived early.
- Size and liquidity. The result is mainly a small-company result, and most tracked names here are large caps.
- Coverage. The tracker reads a capped number of filings per stock, so a buy outside that window will not show.
Treat a cluster as a reason to read the company's filings, not as a conclusion. For the other side of the picture, see how to check if a stock is a value trap.
Insider buying FAQ
Is insider selling a bad sign?
Not by itself. Executives sell for taxes, diversification, house purchases and scheduled plans, and the studies cited here find little predictive power in sales.
How soon after a Form 4 filing do insider buys matter?
A Form 4 is due within two business days of the trade, so it is fresh. Research on insider portfolios found that a meaningful part of the abnormal return arrived soon after the trade, which means a late reader may see little of it.
Does a bigger purchase mean a stronger signal?
Size matters only relative to the buyer. A $50,000 purchase can be a large bet for a director and trivial for a billionaire founder. This site ranks by the number of different insiders buying, not by dollars.
Do option exercises and stock awards count as insider buying?
No. They are compensation, not an insider spending cash. This site counts only open-market purchases, Form 4 transaction code P.
Can I rely on insider buying alone?
No. Even in the research the effect is modest on average and varies by company size and by who is buying. A purchase is one input next to the price, the business and the balance sheet.