Corporate executives use their knowledge of non-public information to inform their perception of potential mispricings in the market. Our research has identified a systematic approach to track insider transactions and produce an actionable indicator of future company performance informed by their disclosures.
The Insider Value factor is the sum of the value of all BUY transactions minus the sum of the value of all SELL transactions, in USD, per company and per day. The factor is available as daily or quarterly aggregations of the net insider value.
Discretionary and quantitative investors can use these factors to build signals that:
when insiders sell the stock in the absence of pre-planned transactions or negative news
when they exercise purchase options or directly acquire shares outside of disclosed incentives.
The RavenPack Earnings Intelligence Insider Transactions factor is the outcome of quantitative research which identifies alpha in the backtesting of the signal. Below are cumulative log-returns for long-short portfolios for global Mid/Large Cap (left), and Small Cap (right) universes from the model that underpins the factor (January 2007 – April 2020) using the 1-day aggregation window signal.
The Factors are the outcome of a multi-step process including:
RavenPack analyzes a comprehensive and high-quality dataset of global insider transactions from over 60 sources of regulatory information. It covers over 550,000 insiders in 100 positions, from CEO and CFO to major shareholders, across 50 countries, and 50,000 small, mid, and large-cap companies, updated daily.
Non-intentional or mechanical transactions, such as awards of shares, exercises of options, tax-related transactions, remuneration and share plan purchases, are excluded as they do not convey proper intent. Transaction from insiders of limited relevance, qualified by an insider level score, are also filtered out.
The signal is defined as the sum of the value of all BUY transactions minus the sum of the value of all SELL transactions, in USD, per company and per day, or aggregated over 90 days. The factor is then published daily at 2.30 AM UTC.
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