---
title: "Are Insider Buys Bullish? What the Research Says"
description: "What academic research found about insider purchases, which kinds of buys the studies separated out, and why a result measured across many trades is not a forecast for one stock."
canonical: https://insideralpha.ai/learn/are-insider-buys-bullish
date_published: 2026-06-01
date_updated: 2026-09-23
publisher: InsiderAlpha (https://insideralpha.ai)
---

Canonical URL: https://insideralpha.ai/learn/are-insider-buys-bullish
Published 2026-06-01. Updated 2026-09-23.

# Are insider buys bullish? What the research says

Some of them have been, on average, in the studies that looked. Researchers who sorted insider purchases by who bought and how routinely found that certain groups of purchases were followed by better returns than the market expected. Taken across every insider trade, the effect is much weaker. And a result measured over many trades and years is not a forecast for the purchase in front of you.

## What the research found

[Lakonishok & Lee (2001)](https://doi.org/10.1093/rfs/14.1.79) found that insider purchases predicted positive future returns, with the effect strongest in small-cap stocks. [Cohen, Malloy & Pomorski (2012)](https://doi.org/10.1111/j.1540-6261.2012.01740.x) split insiders into routine traders, who trade on a fixed schedule, and "opportunistic" ones, who trade irregularly. The abnormal returns they measured came from the opportunistic trades.

Buying and selling are not mirror images in this work. An insider can sell for taxes, a house or diversification. There are fewer reasons to put your own cash into your employer's stock, which is one reason the studies read purchases as more informative than sales.

## What people usually filter for

- **Open-market purchases (code P)** paid for with the insider's own money, not grants or option exercises. Code P also covers private and derivative purchases, so read the row first (the [code guide](https://insideralpha.ai/learn/form-4-transaction-codes) shows how).
- **Senior insiders**: the CEO, CFO or chair, or a [10% owner](https://insideralpha.ai/learn/what-is-a-10-percent-owner).
- **Size** measured against the insider's pay and existing holdings, on a basis you can state.
- **[Cluster buying](https://insideralpha.ai/learn/cluster-buying)** by several insiders in a short window, once you have checked they are really separate buyers.
- **Irregular timing**, rather than a disclosed schedule.

## What usually gets filtered out

- **Equity awards (A) and option exercises (M)**. These are pay, not a decision to buy.
- **Very small purchases** that barely change the insider's holding.
- **Purchases under a disclosed [Rule 10b5-1 plan](https://insideralpha.ai/learn/rule-10b5-1)**, where the timing was set in advance. An unchecked plan box does not prove the opposite.
- **Thinly traded micro-caps**, where the spread and volume may not let you trade anywhere near the insider's price.

## Limits to keep in mind

Insiders are not market timers. They often buy into a decline that keeps going for a while before it turns. The studies measure a tendency across many trades held for months, not a guarantee on any single name. Their samples, benchmarks and trading costs also differ from yours, so a published return is not an expected return for a live ticker.

Sales are harder still. Insiders sell for taxes, diversification and personal reasons all the time, so "insider selling" on its own tells you much less than insider buying. The [selling guide](https://insideralpha.ai/learn/insider-selling-signal-or-noise) covers how to read one.

## How InsiderAlpha uses this

The daily trading plan ranks recent purchases by Alpha Score and lists them top down. A high score means a purchase ranks near the top of that day's plan. It does not mean the stock will rise.

[See this week's largest insider purchases →](https://insideralpha.ai/top-insider-buys-this-week) · [The full buying checklist →](https://insideralpha.ai/learn/insider-buying-signals)

*This article is informational and is not investment advice.*