Substitutes for insider trading

Abstract: Trading upon not released, insider, information is an illegal activity. Trading in shares that can be assumed to perform in a similar way based on the same information is legal, and potentially profitable. The goal of this thesis is to investigate if substitutes to listed shares exist on the Stockholm Stock Exchange, and whether they provide a similar return when affected by releases of insider information. We use an event study methodology and compare the return of the share that releases insider information to the stock market, to that of its substitute. Over a time frame of five years, substitutes show a return indicating that it is profitable for insiders to trade in these securities using insider information obtained from a similar company.