Why do insiders trade? A study on what motivates insiders to trade.

Abstract: This thesis is based on insider transaction data from September 2000 to December 2008 on the Stockholm Stock Exchange. The study gives further insight into insider trading explanations by investigating the connection between insider trades and stock returns in two main methods; one on the individual insider trade level and one on the aggregate insider trade level. On the individual trade level, we find a significant relationship between past return and insider trades both on single trade and when the trades are made in clusters, but no significant relationship with future returns. On the individual trade level with trades made by CEOs only, we find a positive relationship between future return and insider trading volume on 6 months, but no significant relationship to past returns, indicating that CEOs trade on other information than other insiders. On the aggregate stock level, we find in line with Seyhun (1988) that aggregate insider trades predict future abnormal returns of the market.