Insider Trading Patterns

We find that corporate insiders trade over longer periods of time when they may have a longer-lived informational advantage. Controlling for the duration of insiders' trading strategies, both their sales and purchases predict sizable abnormal returns on average. We discuss how failure to account for these trading patterns has previously masked the returns to insider trading, and show how accounting for them helps sharpen screens for corporate insiders who trade on information. We also provide evidence that insiders attempt to preserve their informational advantage to maximize trading profits by disclosing their trades after the market has closed. When insiders report their trades after business hours they are more likely to engage in extended sequences of trades, they trade more shares overall, and their trades predict larger abnormal returns.