We analyze the relationship between insider trading density and the future stock returns in Chinese listed companies. We introduce a new aspect of the trading pattern, insider trading density, to investigate the information advantage held by insiders. Insiders who trade at a low density during their tenure are less likely to be expected to trade than high trading density insiders. The expectedness of trading patterns reflects insiders’ trading incentives and conveys valuable information to predict future stock prices. Controlling for company, deal, and insider-specific characteristics, we find that low trading density insiders earn higher excess returns than high trading density insiders in a portfolio mimicking long strong purchases and short strong sales. In addition, we show that the insider’s position is a source of information advantage: prominent officers such as CEOs and CFOs are more likely to be low trading density insiders, while non-executive directors and supervisors are more likely to be high trading density insiders.

The current paper is concerned with exploring information contained in a series of undisclosed orders that are submitted by the same broker, using this information to estimate the volume contained in the current undisclosed order, and further investigating the trading patterns followed by stockbrokers in the use of undisclosed orders. In an ARMA framework, the estimation results suggest that the information revealed in past-executed undisclosed orders of a stockbroker is explanatory to the volume of the current undisclosed order submitted by the same broker. As a supplement to the current literature relating to the package-trading patterns detected in large disclosed orders, the current study finds that stockbrokers follow the same pattern in the use of undisclosed orders. A practical application of this method is to use it for the prediction of the volume enclosed in a given undisclosed order.