The Value of Information: Inferences from the Profitability of Insider Trading

Abstract

Information may be the key to differential rewards from investment in capital markets. Corporate insiders are thought to have information not available to others which provides them an advantage in investment activities. This has piqued the interest of regulatory officials and investors. For example, regulators in both Canada and the United States have required insiders to report their trading activities and have placed restrictions on the nature of these activities. Additionally, investors have attempted to use information on insider trading activities as a foundation for their own investment strategies.