Corporate insiders in publicly traded companies, such as top executives and directors, know about their firm more than what the market knows. Therefore, in their insider transactions hides the most lucrative information of all – private information. The investment rationale suggests that by mimicking the actions of insiders, both sell and buy transactions, one can achieve a higher return than a simple buy and hold strategy. However, due to insider specific incentives and trading noise, it is important not only to follow all the insiders’ transactions but also to identify which transactions are informative.
CORPORATE INSIDER TRADING SIGNAL
The Insider Transactions signal tracks the aggregated insider actions and ranks stocks from the most insider bought to the most insider sold.
All Form 4 filings are scanned and categorized in TipRanks’ database. To eliminate the noise included in the non-informative actions, an important part of the signal construction is identifying which of the transactions are informative. We include only transactions that have a clear buy or sell motivation and exclude transactions that are more ambiguous or automatic in nature.
The magnitude of the Insider Transaction signal depends on several factors including time passed from the transaction, the type of transaction (Buy or Sell), the number and size of transactions, and several normalizing and statistical adjustment factors.
Stocks are then ranked with the score of 10 to 0, with 10 having the strongest insider transaction trend to 0 having the weakest.
DATA SCOPE & RANGE
TipRanks tracks hundreds of corporate insider transactions published via Form 4 on the SEC website daily. Every month over 10,000 insider transactions are collected and analyzed, of which roughly 20% are categorized as informative. TipRanks scans insider transactions as of January 2009 to the present day.
RAW HISTORICAL DATA AND REAL-TIME API
If you are interested in the raw historical data for the insider sentiment score or directly connecting to the API, please contact TipRanks at firstname.lastname@example.org.