Does Insider Trading Predict Market Returns? Evidence from Aggregate Opportunistic Insider Trades

We find that aggregate opportunistic insider trading positively predicts future market returns in both in-sample and out-of-sample tests. A one-standard-deviation increase in our aggregate opportunistic insider trading index is associated with a 0.57% increase in S&P 500 excess returns in the next month. Moreover, a mean-variance investor has a utility gain of 253 basis points annually when using the index to time the market. The index predicts market returns for up to four months, and the return prediction does not revert afterward. Finally, the index predicts macroeconomic fundamentals, such as changes in total employment and industrial production