Insider trading and excess returns: Evidence from the Swedish stock market

Abstract: This paper aims to examine whether there exist short-term excess returns following insider transactions on the Swedish stock market and, if that is the case, explore whether they differ depending on corporate position of the insider. Based on the results in the first part of the paper, an investigation will be conducted to determine whether outside investors can generate excess returns by pursuing a replicating trading strategy. As there exist no studies of these particular subjects for the Swedish stock market, the contribution of this paper is bridging the gap in existing literature. The first part of the study is able to reject the null hypothesis that excess returns following insider transactions equal zero. Furthermore, the study finds the largest impact on excess returns in the transactions made by non-executive directors. Lastly, this paper finds no statistically significant results regarding the existence of profitable replication strategies for outside investors.