Insider Buying

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Dirks Test

    A standard used by the Securities and Exchange Commission (SEC) ...
  2. Inside Director

    A board member who is an employee, officer or stakeholder in ...
  3. Insider

    A director or senior officer of a company, as well as any person ...
  4. Insider Trading

    The buying or selling of a security by someone who has access ...
  5. Day Trader

    A investor who attempts to profit by making rapid trades intraday. ...
  6. Stock

    A type of security that signifies ownership in a corporation ...
Related Articles
  1. What Investors Can Learn From Insider ...
    Markets

    What Investors Can Learn From Insider ...

  2. Defining Illegal Insider Trading
    Economics

    Defining Illegal Insider Trading

  3. When Insiders Buy, Should Investors ...
    Options & Futures

    When Insiders Buy, Should Investors ...

  4. Policing The Securities Market: An Overview ...
    Investing Basics

    Policing The Securities Market: An Overview ...

Hot Definitions
  1. Return On Sales - ROS

    A ratio widely used to evaluate a company's operational efficiency. ROS is also known as a firm's "operating profit margin". ...
  2. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  3. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  4. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  5. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  6. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
Trading Center