Insider trading<\/a> happens when a director or employee trades their company\u2019s public stock or other security based on important or \u201cmaterial\u201d information about that business. Insider trading isn\u2019t illegal as long as the person reports the trade to the Securities and Exchange Commission<\/a> and the information is already in the public domain.<\/p>\n \n We wanted to know if multinational insiders stand to make more money because of the complexity of the information they could possess relative to outsiders.<\/p>\n So we examined returns from over 2.5 million trades<\/a> reported to the SEC from 1987 to 2019 by insiders at over 10,000 companies. This is only a subset of all insider trades reported during the period because we focused on only those transactions most likely to be informed by the employee\u2019s insight. We then compared monthly returns for insiders at multinational and domestic companies with those for a typical investor.<\/p>\n We found that all insiders beat the market, but those at multinationals did better \u2013 especially if they were on the highest rungs of the corporate ladder. While insiders at domestic companies typically obtained a return of 2.4% in the month following a stock purchase, those at multinational corporations reaped 2.8%. That may not sound like a lot, but, assuming consistent returns, it could amount to earning $170,000 more if an insider traded $1 million over several months. And it\u2019s triple the typical stock market monthly gain of 0.9%<\/a><\/p>\n The most in-the-know insiders \u2013 executives and others with the most intimate knowledge of the company and its operations \u2013 at multinationals got an even bigger advantage, earning 3.6% per month vs. 2.7% at domestic companies.<\/p>\n![\"\"](\"http:\/\/streamapse.com\/TAR\/wp-content\/uploads\/2023\/01\/5156HOMEPAGE_NEW_789d1f79_Banner-1024x473.png\")
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