The informative insider is the one who almost never trades.
Insider-trading research spends its effort on the trade — size, direction, seniority, timing. This paper conditions on the trader instead. Divide the months in which an insider traded by the months of their tenure and you get a density.
Low-density insiders are the ones worth following: their purchases and sales carry the abnormal returns, while frequent traders are largely noise. The reading is that expectedness is the hidden variable — when an action is rare for the actor, the action carries more information. The measure costs nothing to compute; it lives entirely in the public disclosure record, and requires only that you stop discarding the months in which nothing happened.
The reframing generalises well past insiders or China: it applies to any signal derived from someone’s discretionary behaviour, wherever a base rate is available and usually thrown away.
Source paper
Wang, C., Wang, Z., Chiah, M., & Bai, Y. (2025). When insiders trade less: density and return predictability. International Review of Economics & Finance, 104, article 104641.
DOI 10.1016/j.iref.2025.104641 · JEL G12, G14, G34
Personal reading note. Written while studying the paper — not peer reviewed, not a replication, and not a substitute for the source. Every claim above belongs to the authors; any error in restating it is mine. Follow the link. Summarised from the abstract only — the magnitudes are unread.