When insiders trade less: density and return predictability When insiders trade less: density and return predictability

This study examines whether insider trading density predicts subsequent stock returns in China. Trading density is defined as the number of trading months relative to an insider's tenure. Using 40,159 monthly transaction records from 18,206 insiders across 2653 listed firms from 2008 to 2019, we find that low-density trades yield significantly higher abnormal returns for hedge portfolios that go long on strong purchases and short on strong sales. Panel regressions confirm that this result holds after controlling for firm- and insider-level characteristics, trading patterns, and alternative variable specifications. Additional analyses of short-run abnormal returns and large price movements further reinforce the informativeness of trading density. We also find that the predictive power of trading density is moderated by information asymmetry, corporate governance, and account type. These findings suggest that insider trading density captures private information advantages beyond established proxies, giving investors and regulators an additional signal for assessing trading informativeness.