Companies · Industrials · Insiders Trades

Machinery, electrical equipment, transport and engineering firms make up a large share of the broad US samples on which the insider trading literature was built. There is no separate body of research for industrials, so the general findings apply. Jeng, Metrick and Zeckhauser (2003, Review of Economics and Statistics), tracking portfolios that mirror insiders' trades, find that insider purchases earn abnormal returns while insider sales do not.

Size and predictability

Lakonishok and Lee (2001, Review of Financial Studies) find that insiders' ability to predict returns is concentrated in smaller firms and comes from purchases. A purchase by the chief executive of a mid-sized supplier after a profit warning sits closer to that evidence than a sale by a director of a large conglomerate.

Earnings streaks

Ke, Huddart and Petroni (2003, Journal of Accounting and Economics) report that insider selling increased three to nine quarters before a series of earnings increases came to an end, with little selling in the two quarters just before the break. Industrial earnings are cyclical, so an informative sale may precede a downturn by several quarters. The site's own results are on the performance page.