Is Insider Trading Profitable in Germany?

Insider trading has been a profitable investment strategy in the United States for more than 50 years. In a previous article, we pointed to a study showing the profitability of insider trading in the Netherlands. Showing that insider trading is profitable in several other countries gives more credibility to our claim that it’s profitable here. Insiders certainly have more valuable information about their companies than do most (if not all) other investors. The fundamental question is do they take advantage of their private information by profitably trading in the stock market. Perhaps outsiders could profitably monkey these transactions and achieve excess returns.

Insider Trading 3

Germany has a very short history regarding insider transactions. Until 1994, it wasn’t even illegal for insiders to trade based on material, non-public information. Until July 2002, insiders (and their family members) didn’t have to report their transactions to the public. So the few studies that analyze insider trading returns in Germany that do exist are quite recent.

One study shows that insiders in Germany profit substantially by trading in their companies’ stocks. During the first 20 trading days after their transactions, the stocks insiders bought achieved a cumulative abnormal return of 4.38% and the stocks insiders sold declined by 1.47%. These numbers are even better than what we observe in the United States. Another interesting finding is that corporate officers (CEO, CFO, etc.) rarely traded and didn’t earn abnormal returns, whereas members of the board of directors and other insiders traded frequently and often right before major announcements. They achieved higher abnormal returns. One explanation for this is German prosecutors don’t tolerate trading by officers but turn a blind eye to other insiders.

German insiders have 5 business days to report their transactions to the public. Assuming that they wait till the end of this 5 day window, the returns during these five days won’t be available to outsiders (the authors also report that the median reporting delay is only 3 days). Fortunately, during the first 5 days cumulative abnormal return to insider purchases is only 1.62%. Considering that the 20-day cumulative abnormal return is 4.38%, outsiders who mimic insider buys could still achieve a 2.76% return in 15 trading days. These are amazing returns. This shows that markets are very slow to reacting to insider transactions.

It IS possible to beat index funds by monkeying insider purchases.

Related Articles:
Recent Academic Studies in US
Unbelievable Insider Trading Returns in Italy

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!