Market Reactions to Insider Trading and Repurchases: An Empirical Study Measuring Abnormal Returns on the Oslo Stock Exchange
Abstract
This thesis investigates capital market efficiency by investigating market reactions to insider
trading and repurchase announcements on the Oslo Stock Exchange, both separately and
conjointly. Previous research has indicated lack of market efficiency with regards to such
announcements. Our research differs from existing literature by examining a more recent timeperiod
and studying insider trading and repurchase announcements conjointly on the Oslo
Stock Exchange. There are several findings in our study. Firstly, for insider trading
announcements, we find significant short-term abnormal returns of 1,00% across all insider
buy sizes, and 2,55% for large monetary insider buys. Second, we also find significant longterm
abnormal returns associated to insider buying and insider selling, at 3,07% and -2,68%
respectively. Long-term abnormal returns increase for larger monetary sized trades for both
buys and sells, suggesting a positive relationship between abnormal returns and insider trade
size. Moreover, we find evidence of short-term abnormal returns associated with repurchase
announcements of 1,84% and show that the insider net purchase ratio1 decreases as time
approaches announcement date, suggesting decreasing insider trading activity. Finally, we
show that a one unit increase in the net purchase ratio can be associated to a 1,73% increase
of abnormal returns in a buy-and-hold strategy, suggesting a positive relationship between
insider net purchasing and announcement returns.