People who work for big international companies and trade stocks using the knowledge they get from their jobs make more money than those who work for U.S. companies that only do business within the country, according to research from Mississippi State University.
Insider trading is when a boss or an employee buys or sells their company’s stock based on important information that the public doesn’t know. It’s not against the law as long as they tell the government about it and the information is already known by everyone.
Insider trading
The researchers wanted to figure out if people who work for big international companies make more money from insider trading because the information they have is more complex than what people from outside the company know.
To check this, they looked at more than 2.5 million times when insiders at over 10,000 companies reported their stock trades to the government from 1987 to 2019. This is only part of all the insider trades that happened during that time, because they focused on the ones where employees probably used their special knowledge. Then, they compared how much money these insiders made each month with the money a regular investor would make.
The study found that all insiders did better than the regular stock market, but those who worked at big international companies did even better, especially if they were high-up in the company. Insiders at U.S. companies usually made about 2.4% more in the month after buying company stock, but those at big international companies made 2.8% more.
This might not seem like a huge difference, but if this keeps happening over time, it could mean making an extra $170,000 if an insider traded $1 million over a few months. Plus, it’s three times more than what the regular stock market goes up in a month, which is usually 0.9%.
The insiders who knew the most—the top bosses and those who knew a lot about the company and how it works—at big international companies had an even bigger advantage. They made 3.6% more money each month, while insiders at U.S. companies only made 2.7%.
