Not all trades are created equal. For example the fact that a COO sells part of her equity awards for tax purposes says very little about her sentiment towards the company. However when a CEO of a tech company substantially increases his position when the stock’s momentum is in an uptrend – that trade provides a lot more information.
Taking this into account, our model ranks companies based on insider sentiment to identify the transactions and insiders with the highest predictive strength. It then delivers a trading signal in the form of a score, which can be used as an input to the portfolio construction process.
The 2iQ model shows consistent excess returns across market cycles whilst demonstrating very low levels of correlation with other traditional quantitative or fundamental factors, both of which are strong indications of additive returns to an existing investment process. This standardized model is useful in providing an overall benchmark for use of this data within your investment process, whilst also delivering a baseline methodology that can be adapted and tuned to meet your needs.
Please contact us for a whitepaper containing a detailed methodology of our model, or any other questions.