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Trading on Inside Track : An Event Study of Market Reactions to Legal Insider Trading on the Oslo Stock Exchange

Birkeland, Marius; Li, Kevin Maosheng
Master thesis
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URI
https://hdl.handle.net/11250/3095249
Date
2023
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  • Master Thesis [4657]
Abstract
This master thesis investigates the market reactions to legal insider trading on the Oslo Stock

Exchange using the methodology outlined by MacKinlay (1997). The analysis is based on a

sample of 2419 insider trades publicly disclosed between 01.01.2017 and 31.12.2022.

The results of the event study suggest that insider purchases generate significantly abnormal

returns, yielding 1.14 percent for the full sample in the event window [0, 1]. We observe a

pattern indicating that larger transactions yield higher abnormal returns than smaller

transactions. However, we do not observe a similar pattern for insider sales. Furthermore, the

market reacts more strongly to purchases made by insiders higher up in the company hierarchy,

such as chief officers and chairs.

The market reactions were stronger for insider purchases within industrial companies and in

R&D-intense companies, specifically in the health care and information technology industry.

Conversely, insider sales within companies related to information technology, industrials, and

financial services gave significantly negative abnormal returns. Finally, for our cross-sectional

regression analysis, larger companies and companies with a high share of insider ownership

had a negative effect on the abnormal return. On the opposite side, insider purchases in

companies with higher volatility and liquidity positively affect abnormal returns.

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