Here I present the backtest of Insider trading based on the following rules:
1. Which Stocks to buy: The top 10 Pure Insider Buy stocks on Monthly and Quarterly timeframes – as presented HERE.
2. How to Buy: Buy Rs. 1000 worth of every stock – so total 1000*10= Rs. 10000, every month.
3. When to Sell: Results presented below for selling after 1 Month, 3 Months and 6 Months.
Data duration for backtest: H1 2018 (>June) – Q1 2022 (<April)
Data Source: CM Data from NSE (raw)
Results for stock recommendation on Monthly timeframe of Insider Buying
Results for stock recommendation on Quarterly timeframe of Insider Buying
Those who wish to play around with the results further, please download the following results files
MONTHLY TIMEFRAME RECOMMENDATION RESULTS
QUARTERLY TIMEFRAME RECOMMENDATION RESULTS
Limitations:
1. Nominal results are presented and aggregated (although normalized to 1000).
2. Raw data of CM used. Though even if we refine the data for bonus/splits/dividends, results are going to improve on a forward basis. Hence, little problems of overestimating profits. Might be overestimating loss.
3. Results are not benchmarked. Those who are interested can do it by themselves.
Conclusion: Going long a stock exhibiting insider trading (buying) on monthly/quarterly timeframe with fixed investment into the top 10 stocks (by insider bought value) will likely result in profit if held for a quarter, or better 6 months.
Implication: This might be a good enough recommendation to be called an Alpha Leak, given the fact that the recommendations will be updated automatically every month. The recommendations will be available on the INSIDER TRADING REPORT.