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The CEO stock buying bump

Next time you see an executive invest in their own company, it might pay to follow suit.

Last week, United Continental Holdings announced that CEO Oscar Munoz had bought $1 million worth of the company's stock. Similarly in February, JPMorganChase CEO Jamie Dimon bought $26 million worth of his company's shares — and he's seen a 20 percent return since then.

A broader look at the data suggests that a regular investor could actually make money by following these CEO purchases.

There are a lot of ways to slice the data, because CEOs are buying stock all the time. But there was often a decent stock jump shortly after a CEO purchase.

Since 2003, there have been more than 200 different instances of CEOs buying at least $1 million of their own company's stock. The data come from filings with the Securities and Exchange Commission, listed at openinsider.com. Filtering out out some penny stocks and other aberrational purchases, what was left showed meaningful jumps:

There is a decent six-month return, but it's not that much more than what came in the first week. That means the majority of returns comes immediately: It's a nice way to grab a quick pop. More money was made in the first week than the 25 weeks after that.

In addition to those seven-digit purchases, broadening search criteria find a similar pattern following purchases of $250,000 or more. There were more than 800 instances of this since 2003.

Same story: a good jump in the first week that continued for the next six months. There seems to be a trend in following the CEOs and hanging on. They probably know more about their company's future than the rest of us. They also could be buying when the stock is otherwise undervalued, and waiting for it to go up.

Again, you can slice the data however you want. One set of researchers in Europe found strong returns when CEOs bought shares, but they only looked at CEOs who already owned at least 5 percent of the company. These weren't just your average CEOs, but big stakeholders. Many of them were company founders. Researchers found these companies performed 5.7 percent better annually compared with companies with similar risk profiles.

It might be hard to replicate this type of strategy in the real world, because you'd have to pay commission costs on every single one of these companies, as The Wall Street Journal reported. On a quick glance, however, it does seem like big CEO buys might lead to better returns in the near future.