Follow the Insider: An event study on the impact of Insider transactions
Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Although there are as many trading strategies as there are people in this world, the traditional opinion is that investments should be based on sound fundamental analysis which in turn is partly based on information that by law should be given to the financial market without delay. The Efficient Market Hypothesis (EMH) states that prices quickly adjust to new information and that current prices are accurately reflected by all the information about the asset in question (Fama, 1970). Thus, no investor should have an advantage in forecasting future stock prices since no one is supposed to have access to information that has not already been made public. But what if the markets do not apprehend important information immediately? What if there are asymmetries that are being taken advantage of? The aim of our Master thesis was to study the phenomena of Insider trading and the potential abnormal returns these may cause. In other words, the question we asked was whether replicating Insiders is a good trading strategy? The findings from our comprehensive study and its results speak of a considerable high abnormal return. The following computations of the statistical significance of our results further reinforce the credibility in them. This implies, in contrast to other similar studies made in Sweden, that it in fact is possible to gain on Insider trading.
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IdentifiersURN: urn:nbn:se:su:diva-5965OAI: oai:DiVA.org:su-5965DiVA: diva2:195875