Sometimes in historical data, but that does not mean a single Form 4 filing reliably predicts a stock’s future performance—or that an outside investor can profit by following it. Studies have found predictive associations in aggregate insider activity and in some cross-sectional comparisons, but results depend on the sample, trade type, firm size, return measure, and when the investor is assumed to act.
What a Form 4 can tell you—and when it tells you
Form 4 is a public disclosure of reportable changes in corporate insiders’ securities ownership. For transactions covered by the post-August 2002 reporting rule, insiders generally must report within two business days. Filings become available through SEC EDGAR after submission. The date an insider traded and the date the filing became public are therefore different dates, and only the latter is available to an outside investor deciding whether to follow the disclosure.
That timing distinction separates two questions: whether an insider’s trade contained information when it happened, and whether that information remains useful after it is publicly disclosed. A study that measures returns starting on the transaction date may include gains that a public follower could not have captured.
What the historical studies found
The published findings are not a simple yes or no. They test different outcomes: aggregate market-level prediction, differences in returns across companies, or price movements around insider trades and reports.
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| Study and sample | What it examined | Reported finding | What the result does—and does not—show |
|---|---|---|---|
| H. Nejat Seyhun, Quarterly Journal of Economics, 1992; U.S. insider activity from 1975–1989 | Aggregate net open-market purchases and sales, compared with one-year-ahead aggregate stock returns | The paper reported that aggregate insider activity predicted up to 60% of variation in one-year-ahead aggregate stock returns. | This is an in-sample historical association at the aggregate level, not an individual-stock success rate or a current forecast. Seyhun attributed the predictive ability to both changing business conditions and movement away from fundamentals. |
| NBER summary of a study of NYSE, Amex, and Nasdaq companies from 1975–1995 | Market movements around insider trades and reports, and cross-sectional differences in stock returns | The summary reports very little market movement when insiders traded or reported trades to the SEC. It also reports that insiders appeared able to predict cross-sectional returns, driven by smaller firms. | A difference across firms is not the same as a broad market move or a signal that applies equally to every stock. The historical period and the summary’s limited detail constrain what can be inferred about present-day investor returns. |
| SEC 2022 Rule 10b5-1 rulemaking review | Evidence on transactions associated with Rule 10b5-1 trading plans | The SEC reviewed studies reporting negative abnormal returns after some plan sales and positive abnormal returns after some plan purchases, as well as studies finding no significant difference between plan sales and non-plan sales. | The evidence is mixed, and voluntary reporting of plan status and other data limitations make plan classification imperfect. The review does not establish that every plan-linked trade is informative or uninformative. |
These findings can coexist. Aggregate net buying might relate to future overall returns even if the market barely moves when a particular insider trades. Insiders may also appear better at anticipating returns among smaller companies without every reported transaction offering a usable signal.
Why a filing is not automatically a trading signal
The public entry point can be later than the trade
A recent 2026 working-paper search-result summary by Omer Ozlen and Ozkan Batumoglu, titled The Death of Insider Trading Alpha: Most Returns Occur Before Public Disclosure, reports that 70–80% of measured alpha dissipated between the transaction and the following trading day when strategy entry was delayed to public disclosure. The paper’s methods and sample could not be verified from the available document, so that figure is preliminary—not an established consensus or a universal estimate. Its practical warning is sound: a test that starts at the trade date can overstate what someone following a public filing could earn.
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A sale can have many explanations
A Form 4 reports a transaction; it does not by itself establish the insider’s motive. A sale may be associated with a Rule 10b5-1 plan, and the SEC’s review found conflicting evidence about plan-linked trades. The agency also noted that the available data did not let it estimate how common limit orders were in such plans or quantify the resulting potential bias in measured profitability. Where available, an investor evaluating a filing should distinguish open-market trades from other transaction types and consider the insider’s role, trade size relative to holdings or compensation, and whether the trade is plan-linked. None of those details alone proves what the insider expects the stock to do.
Return definitions change the claim
“Outperformed” is incomplete without a benchmark and holding period. A raw stock return, a market-adjusted return, and a factor-adjusted abnormal return answer different questions. A strategy claim also needs realistic disclosure-based entry timing, transaction costs, and an account of risk. Historical statistical predictability does not, by itself, demonstrate an investable edge after those choices are made.
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How to assess a claim that Form 4 trades predict returns
- Start the clock at public disclosure. Do not count returns earned between the insider’s transaction and the time a follower could see the filing.
- Identify the sample. Look for the period, market universe, and whether the analysis concerns a single stock, a cross-section of firms, or aggregate insider activity.
- Check which transactions are included. Findings about aggregate net open-market purchases and sales should not be generalized to all reported ownership changes.
- Examine the trade context. Consider the insider’s role, trade size relative to holdings or compensation, and plan status if the data provide it; do not treat a sale alone as evidence of negative expectations.
- Ask how performance is measured. Require a stated return window, benchmark, adjustment method, execution assumption, and treatment of costs before accepting an outperformance claim.
What the evidence does not establish
- It does not provide a general success rate for following an individual Form 4 filing.
- It does not establish a guaranteed return or a current out-of-sample performance estimate for a Form 4-based strategy.
- It does not show that every insider trade is informed, or that every sale signals expected weakness.
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