Insider Buying

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DEFINITION of 'Insider Buying'

The purchase of shares of stock in a corporation by someone who is employed by the company. Insider buying should not be confused with insider trading. Insider trading refers to corporate insiders trading on private information, an activity that is illegal. However, insider buying is based on public information in a situation where insiders believe that their stock is undervalued.

BREAKING DOWN 'Insider Buying'

Insider trading is often a temptation faced by corporate officers and board members who know of new products or inventions that could cause the stock price to rise. Those in this position must carefully adhere to special regulations when purchasing stock in their companies to avoid penalties. On the other hand, insider trading typically occurs when employees believe that the public is not valuing their stocks properly. Because insider transactions are public information, knowing that insiders are purchasing stock can signal future stock appreciation.

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RELATED FAQS
  1. What is the difference between wash trading and insider trading?

    Wash trading is an illegal trading activity that artificially pumps up trading volume in a stock without the stock ever changing ... Read Full Answer >>
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    Since markets experience asymmetric information between parties, monitor whether there is an imbalance between the open interest ... Read Full Answer >>
  3. If I write a blog post about stocks I own, is that considered insider trading?

    Writing a blog post about stocks you own is not considered insider trading. The only duty of the blogger is to disclose he ... Read Full Answer >>
  4. Why is moral hazard so prevalent in the financial services industry?

    Moral hazard tends to be prevalent in the financial services industry due to the nature of the industry, temptation and greed, ... Read Full Answer >>
  5. Can you accidentally engage in insider trading?

    In 2011, an article appeared in the New York Daily News titled "Insider trading is not always high-profile or intentional; ... Read Full Answer >>
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    Berkshire Hathaway came under intense scrutiny in 2011 for possible insider trading prior its acquisition of the chemicals ... Read Full Answer >>

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