An Event Study of Insider Trading on the Iceland Stock Exchange

Abstract: The purpose of this study is to examine whether insiders on the Icelandic market generate abnormal returns. The abnormal returns are defined as the cumulative average abnormal return (CAAR) where the Iceland All-Share Index serves as the benchmark. The study used a sample of 3,426 insider trades notifications from the Icelandic market during the period from 1 July 2000 to 31 December 2007. The main findings are that Icelandic insiders have managed to earn abnormal returns for both buy and sell transactions over the short, medium and long term horizon except for sell transaction over the shortest window. The results also show that large owners and board members do not generate positive CAAR for their buys transactions. When looking at results by company size the highest CAAR is obtained for buys in Large Companies and sales in Small Companies. Industry analysis suffered from a small sample in many categories but sell transactions for Industrial, Consumer Staples and Health Care companies were the ones that generated the highest CAARs.