Search the Bridge

Mailing List

Contact Us


Research Briefs

Search Research Briefs
| Browse Research Briefs

An inside job. How much do corporate insiders really make when trading their company's stock? Using a novel approach to examining the profits of insider transactions, School of Management Assistant Professor of Finance and Economics Leslie Jeng and colleagues from Harvard University and Harvard's JFK School of Government found that insiders profit handsomely when purchasing securities, but not at all when selling them. Their recent study examines 21 years of insider transactions, with a focus on top executives such as CEOs, board chairs, and presidents, who usually have the best information about their organizations.

While executives are allowed to legally trade their company's securities -- for instance, when exercising stock options -- all such transactions must be reported monthly to the Securities and Exchange Commission, which uses this data to identify illegal insider trading. For example, a stock might be labeled an "insider buy" if at least three insiders bought it and none sold it.

"American regulators are concerned with whether the playing field is level," explains Jeng. "Profitable insider trading is often viewed as unfair to outside investors, which undermines the public's confidence in the markets, diminishes their willingness to trade, and thereby reduces the financial markets' efficiency."

Despite the significant profits to insider purchases, the research team finds that outside investors have little to fear from trading with these insiders. The expected cost to outside investors due to the purchases of insiders is only about 0.0015 percent a year.

The researchers say their study shows that current regulations sufficiently curtail excessive insider trading.

"Insiders enjoy a tilted playing field, but not enough to discourage outsiders from trading," says Jeng. She compares inside traders to ace racetrack handicappers: "They profit nicely, but only impose a tiny loss on the masses. Regulators should be reassured that the system appears to be working."

Loosen that grip. Researchers at the School of Medicine and the Arthritis Center have determined that people with a strong grip are at increased risk for osteoarthritis in certain hand joints. Osteoarthritis, the most common form of arthritis, is caused by the wearing away of joint cartilage, and it affects about 20 million Americans over the age of 45.

Using data from the long-running Framingham Heart Study, Christine Chaisson, project manager of the Arthritis Center, and Dr. David Felson, MED professor of medicine, analyzed both grip strength data and enhanced X-ray data for nearly 500 men. They found that those with a strong grip were more likely to have the MCP joints (those closest to the palm) and the joint at the base of the thumb affected by osteoarthritis.

According to Chaisson, this is the first study to examine the relationship between osteoarthritis and grip strength in different types of hand joints. "The forces at the joint and the frequency with which those forces are applied is new territory in arthritis research," she notes. "We've had some studies about hand biomechanics that show force along the joints, but no one has evaluated this particular association before."

Muscular contraction and its effect on the joints is extremely complex. "Some types of force are beneficial, and some are potentially harmful," she says.

The study appeared in the January issue of Arthritis and Rheumatism and was done in conjunction with Northwestern University and the National Heart, Lung and Blood Institute's Framingham Heart Study.

"Research Briefs" is written by Joan Schwartz in the Office of the Provost. To read more about BU research, visit


15 May 2003
Boston University
Office of University Relations