Data Interview Question

Insider Trading Activities

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Requirements Clarification & Assessment

  1. Understanding Insider Trading

    • Definition: Insider trading involves buying or selling a publicly-traded company's stock by someone with access to non-public, material information.
    • Types of Insider Trading:
      • Legal: Insiders trading on their own company’s stock but reporting it to regulatory bodies.
      • Illegal: Trading based on confidential information not available to the public.

  2. Objective

    • Develop a method to detect potential insider trading activities using available datasets.

  3. Data Requirements

    • Insider Trading Data: Regulatory filings (e.g., SEC Form 4) detailing trades by insiders.
    • Market Data: Historical stock prices, trading volumes, and timestamps.
    • Corporate Event Data: Dates and details of earnings releases, mergers, acquisitions, and other significant events.
    • Public News and Information: News releases and public announcements.

  4. Key Indicators of Insider Trading

    • Unusual trading volumes or stock price movements before major announcements.
    • Patterns of trades by insiders just before significant price changes.

  5. Constraints

    • Access to accurate and comprehensive data.
    • Legal and ethical considerations in analyzing insider trading activities.