Corporate insiders—executives, directors, and large shareholders—file public disclosures when they buy or sell shares in their own companies. In the United States, these filings are submitted to the SEC and published through EDGAR. SEC rules require filing within two business days of most transactions, though late filings occur, amendments may follow, and timing varies in practice.
Over time, these disclosures accumulate into a record of each insider's reported trading activity. This record is not exhaustive—it reflects what was disclosed, subject to filing completeness and data availability.
The P-Factor methodology, developed by AugurSignals, asks a specific question about that record: across an insider's career, how has he disclosed purchases performed? Here, "performed" means the price outcomes that occurred after disclosure, measured mechanically from the point when a filing became publicly available.
This is not an assessment of a single transaction. It is a measurement of patterns across a beneficial owner's complete history of disclosed purchases.
This page explains what the P-Factor methodology measures and why we designed it this way. It does not cover how to interpret specific insider behaviors—see Insider Activity Explained. It does not cover the limitations of insider data as an information source—see Limits of Insider Data.
Why Purchases
The methodology focuses on open-market purchases—transactions where an insider buys shares on the public market.
Sales are excluded from the current scope. Insider selling has many documented motivations unrelated to expectations about the company: portfolio diversification, tax planning, liquidity needs, or execution of pre-established 10b5-1 plans. Modeling which sales reflect expectations and which reflect other factors requires different analytical approaches.
Purchases were chosen as the initial scope because the range of documented non-informational motivations is narrower—not because purchases are free of confounding factors. Compensation-related purchases, signaling motives, and other non-informational reasons for buying exist. The scope decision reflects relative modeling complexity, not a claim about informational purity.
This is a methodological boundary. Sales may carry information in specific contexts; the current methodology does not attempt to isolate it.
Two Perspectives
When an insider executes a purchase, there is a timing gap before the transaction becomes visible to outsiders.
SEC rules require insiders to file a Form 4 within two business days of most transactions, though compliance varies and amendments occur. Once filed, the disclosure is publicly available. Before that point, the transaction is not observable from outside the company.
The P-Factor methodology measures price outcomes from two timing points:
Insider perspective. Measurement begins from when the insider executed the transaction. This reflects outcomes relative to the insider's execution timing.
Follower perspective. Measurement begins from when the disclosure became publicly available. This reflects outcomes relative to when an outside observer could have been aware of the transaction.
The difference between these two measurements is the disclosure lag—the time between an insider's transaction and the public availability of the filing. This gap captures one dimension of the timing difference between insider action and public visibility. It does not represent the full scope of informational asymmetry between insiders and outsiders—other differences in knowledge and context exist that are not observable in disclosure data.
The P-Factor rating is based on the follower perspective. The insider's execution timing is not accessible to someone reading a disclosure after the fact. The methodology measures outcomes from the point when the information became public.
The size of this gap varies by filing timing and market conditions.
Career Patterns
A single purchase followed by favorable price movement could reflect coincidence, favorable market conditions, or factors unrelated to the insider's timing. One transaction does not establish a pattern.
The P-Factor methodology aggregates across an insider's complete history of disclosed purchases. Transactions are treated uniformly—not weighted by dollar amount or position size. An insider with twenty measurable purchases provides more data points than one with three.
This approach measures whether an insider's purchase timing has historically aligned with subsequent price outcomes, across many observations. It does not measure economic magnitude, and it does not distinguish between possible explanations for any alignment observed.
Transactions without sufficient price data are excluded from the calculation. The number of transactions that could be measured is tracked separately from the total number of transactions disclosed.
For how insider data functions as an information source, see What Insider Data Reveals.
What the Rating Reflects
The P-Factor rating summarizes historical price outcomes following an insider's disclosed purchases, measured from the follower's timing perspective.
It answers a mechanical question: what price outcomes occurred after this insider's purchase disclosures became public? The measurement uses a fixed observation window applied uniformly across all transactions. It is not optimized for any particular decision rule or holding period.
Insiders with insufficient transaction history or incomplete price data receive no rating. The methodology does not estimate outcomes where the data cannot support measurement. A missing rating indicates insufficient information for calculation, not poor historical outcomes.
The rating describes what the historical record shows. It does not predict how future transactions will perform, and it does not imply skill or intent.
For how transaction patterns vary across different contexts, see Reading Transaction Patterns.
How This Differs
Many approaches to analyzing insider activity measure returns over fixed windows following a disclosure—30 days, 60 days, or similar periods. These event-window methods commonly assess individual transactions separately.
The P-Factor methodology takes a different approach. It aggregates across an insider's full history of disclosed purchases and measures from the follower's realistic awareness point rather than the insider's execution date.
This shifts the question from "what outcome followed this transaction?" to "what does this insider's full record of disclosed purchases look like from a follower's timing perspective?"
For a fuller comparison of approaches, see How AugurSignals Differs.
What This Is For
Insider purchase disclosures are public. Anyone can see that a CEO bought $500,000 of their company's stock. What is not immediately visible is context: have this insider's previous purchases been followed by price increases? Price decreases? Is there enough history to see a pattern?
The P-Factor methodology makes that context visible. For insiders with sufficient transaction history, it calculates what price outcomes followed their disclosed purchases—measured from when the information became public.
This enables a specific comparison: given two insiders making similar purchases, do their historical track records differ? One may have a history of purchases followed by price increases. Another may have a history of purchases followed by declines. A third may have too few transactions to assess.
The methodology surfaces this historical record. Now you see things in context and can interpret the events.