# The Only Copy-Trading Strategy That Passed — U.S. Insider Cluster Buying
- Source: FoldAlpha Research (https://app.foldalpha.com/en/research/insider-cluster-buying) · Published: 2026-09-01 · Series: Myth Testing 12

> **⚠ Correction (2026-09-04)** — The original figures in this article (+2.78%p, t 5.6) reflect a look-ahead error in which the backtest code entered at the **closing price on the filing date itself**. Since 68% of Form 4 filings are submitted after the market close, that price was not available to buy at. Recomputing with the actually investable **next trading day's open**, the same sample (2023H2 onward) gives 20-day +1.22%p (t 2.6), and the full 2015–2026 period gives +0.57%p (t 2.0). The overnight reaction from the filing-date close to the next day's open was +0.76% (t 9.9), meaning **most of the original figure was what the market had already priced in immediately after the announcement**. Details in [Article 17](/en/research/insider-cluster-recheck). The body below preserves the original text, with corrected figures shown alongside in the table.

In this series, following foreign investors ([Article 1](/en/research/foreign-flow-following)), institutions ([Article 2](/en/research/institution-following)),
Congress ([Article 3](/en/research/congress-copy-trading)) and Buffett ([Article 4](/en/research/buffett-13f-copy)) were all rejected.
The fifth target, tested with the same methodology, passed: open-market buying by insiders at U.S. companies.

## Test Method

- **Data**: SEC insider transactions data sets, 11 quarters (2023Q3–2026Q1), 50,031 open-market purchases (TRANS_CODE=P) — only trades where officers, directors, or 10% holders **bought with their own money** (compensation and option exercises excluded)
- **Signal aggregation**: by (ticker, filing date). U.S. insider filings have a lag of **2 business days**, the shortest of any disclosure tested in this series
- **Entry**: ~~closing price on the trading day after the filing date~~ → **Correction: the code entered at the closing price on the filing date itself (look-ahead).** The struck-through figures in the table below are that result; the corrected figures use the next trading day's open

## Results

| Signal | Holding | Excess vs. SPY | Test |
|---|---|---|---|
| **Cluster (2 or more insiders buying on the same day)** | 20 days | ~~+2.78%p~~ → **corrected +1.22%p** (D+1 open) | ~~t=5.6~~ → t 2.6 |
| Large purchases of $250k or more | 20 days | +1.87%p | t=6.5, 1,336 trades |
| 〃 | 60 days | +1.24%p | t=1.9 (weakening) |
| 〃 | 120 days | +1.02%p | t=1.0 (gone) |

By year (cluster, 20 days): 2023 +3.94 / 2024 +2.07 / 2025 +2.63 / 2026 +3.52%p — **positive in all four years.**

## Why Only This One Passed

This is consistent with the common conclusion of the series: what determines whether copy trading works is not "whose trades you follow" but
**the disclosure lag and the half-life of the information**. The fact that the effect weakens at 60 days and disappears at 120 days
tells us the half-life of this information is about one month — and the disclosure lag is 2 days.
Information with a one-month half-life can be caught with a 2-day lag. Congress (lag of up to 45 days) and
13F (45-day lag) have half-lives shorter than the lag, so nothing was left by the time of disclosure.

The structure of the signal — "several officers each buying with their own money on the same day" — also makes sense:
a single purchase can have many explanations (rebalancing, signaling), but simultaneous purchases are unlikely to coincide by chance.

## So Why Hasn't It Been Deployed Live Yet (Reservations)

1. **18% price coverage** — our U.S. price data (1,596 large- and mid-cap names) covers only 18% of the tickers in the insider signal. Excluding small caps is conservative in direction, but questions about sample representativeness remain
2. Cross-event market correlation may have inflated the t-statistics
3. Whether +2.5%p per month survives real-time collection lag and execution slippage is untested
4. A 2.5-year sample — it may depend on the 2023–2026 bull market

The plan is to extend the test back to 2015 with historical data and to fill in small-cap prices before judging.
**Attaching this many reservations even to a passing verdict** — that is the same principle behind why this series trusts its rejections.

## Data Sources

- SEC Insider Transactions Data Sets (Form 4), self-collected U.S. equity price database

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This article documents tests on historical data for informational purposes only. It is not investment advice or a recommendation to buy or sell any security. Past test results do not guarantee future returns.