During periods of severe economic upheaval, investors can gain valuable insights into future stock market performance by watching how corporate insiders trade their own companies’ shares. That is the main conclusion of a new study by researchers at Washington State University examining insider behaviour during the Covid-19 pandemic. Published in the Pacific-Basin Finance Journal, the research analysed trading patterns during the extraordinary market turmoil of early 2020 and found that insiders often moved against the broader market — a strategy that later proved highly predictive.

As panic swept through financial markets in the early days of the pandemic, most investors rushed to sell. In contrast, many corporate insiders were buying. When markets later recovered, a significant number of insiders shifted to selling. These contrarian trades proved strong indicators of how stocks would perform over the following year. “When insiders bought, the stock generally performed better, and when they sold, performance tended to weaken over the next 12 months,” said lead author George Jiang, professor and Gary P. Brinson Investment Management Chair in the Department of Finance and Management Science at Washington State University’s Carson College of Business.

Because insider trades must be reported to the U.S. Securities and Exchange Commission and are publicly available on the SEC website and on financial data platforms such as Barchart, the information is accessible to all investors. Jiang noted that tracking these transactions during periods of market shock can help investors separate meaningful signals from short-term noise. While insiders are strictly prohibited from trading on confidential, non-public information, their deep understanding of their companies’ financial health and broader economic conditions still gives them a significant informational advantage.

The pandemic acted as a “natural laboratory” for the researchers. In early 2020, global markets experienced one of their most violent and uncertain periods in decades, driven by uneven government responses, widespread lockdowns, and severe supply-chain disruptions. The study found that insider buying surged from late February to early April as markets collapsed, followed by a fourfold increase in insider selling over the rest of the year. Statistical analysis showed that insiders systematically bought undervalued stocks and sold overvalued ones, with these decisions accurately predicting later market movements. The findings highlight how insider trading became more informative during the crisis, while also underscoring persistent concerns about information gaps between insiders and everyday investors.

“Markets will always be volatile from time to time, so uncertainty is unavoidable,” Jiang said. “These results offer important lessons for the future — for both investors and regulators. For investors in particular, paying attention to what insiders do can be especially valuable during moments of extreme uncertainty.”

More information: George Jiang et al, Insider trading patterns during the COVID period, Pacific-Basin Finance Journal. DOI: 10.1016/j.pacfin.2025.102957

Journal information: Pacific-Basin Finance Journal Provided by Washington State University