This study investigates the profitability of insider trading and its implications for market efficiency. Using approximately 60,000 insider transactions from 1975 to 1981, the author examines whether insiders can earn abnormal profits by trading their firm's securities. The study also explores whether uninformed outsiders can benefit from imitating insiders and the determinants of insiders' predictive ability. Additionally, it analyzes the effect of insider trading on trading costs for other investors. The findings suggest that insiders can indeed predict future stock price changes and earn abnormal profits, but these profits are not significant enough to outweigh the costs imposed on uninformed traders. The bid-ask spread, which reflects the expected loss to informed traders, is positively related to the size of the firm, indicating that smaller firms have higher costs due to greater information asymmetry. The study concludes that market efficiency holds, as outsiders cannot earn abnormal profits after the public dissemination of insider trading information, even when considering more selective trading rules.This study investigates the profitability of insider trading and its implications for market efficiency. Using approximately 60,000 insider transactions from 1975 to 1981, the author examines whether insiders can earn abnormal profits by trading their firm's securities. The study also explores whether uninformed outsiders can benefit from imitating insiders and the determinants of insiders' predictive ability. Additionally, it analyzes the effect of insider trading on trading costs for other investors. The findings suggest that insiders can indeed predict future stock price changes and earn abnormal profits, but these profits are not significant enough to outweigh the costs imposed on uninformed traders. The bid-ask spread, which reflects the expected loss to informed traders, is positively related to the size of the firm, indicating that smaller firms have higher costs due to greater information asymmetry. The study concludes that market efficiency holds, as outsiders cannot earn abnormal profits after the public dissemination of insider trading information, even when considering more selective trading rules.