Large-scale insider trading analysis: patterns and discoveries

  • Acar Tamersoy
  • Elias Khalil
  • Bo Xie
  • Stephen L. Lenkey
  • Bryan R. Routledge
  • Duen Horng Chau
  • Shamkant B. Navathe
Original Article

DOI: 10.1007/s13278-014-0201-9

Cite this article as:
Tamersoy, A., Khalil, E., Xie, B. et al. Soc. Netw. Anal. Min. (2014) 4: 201. doi:10.1007/s13278-014-0201-9

Abstract

How do company insiders trade? Do their trading behaviors differ based on their roles (e.g., chief executive officer vs. chief financial officer)? Do those behaviors change over time (e.g., impacted by the 2008 market crash)? Can we identify insiders who have similar trading behaviors? And what does that tell us? This work presents the first academic, large-scale exploratory study of insider filings and related data, based on the complete Form 4 fillings from the U.S. Securities and Exchange Commission. We analyze 12 million transactions by 370 thousand insiders spanning 1986–2012, the largest reported in academia. We explore the temporal and network-based aspects of the trading behaviors of insiders, and make surprising and counterintuitive discoveries. We study how the trading behaviors of insiders differ based on their roles in their companies, the types of their transactions, their companies’ sectors, and their relationships with other insiders. Our work raises exciting research questions and opens up many opportunities for future studies. Most importantly, we believe our work could form the basis of novel tools for financial regulators and policymakers to detect illegal insider trading, help them understand the dynamics of the trades, and enable them to adapt their detection strategies toward these dynamics.

Copyright information

© Springer-Verlag Wien 2014

Authors and Affiliations

  • Acar Tamersoy
    • 1
  • Elias Khalil
    • 1
  • Bo Xie
    • 1
  • Stephen L. Lenkey
    • 2
  • Bryan R. Routledge
    • 3
  • Duen Horng Chau
    • 1
  • Shamkant B. Navathe
    • 1
  1. 1.College of ComputingGeorgia Institute of TechnologyAtlantaUSA
  2. 2.Division of Economic and Risk AnalysisU.S. Securities and Exchange CommissionWashingtonUSA
  3. 3.Tepper School of BusinessCarnegie Mellon UniversityPittsburghUSA