Independent thesis Advanced level (degree of Master (One Year)), 20 credits / 30 HE credits
Abstract
Title: Can outsiders obtain abnormal returns by imitating insider trading?- An application to trade in tech stocks on the Nasdaq Stockholm stock exchange.Comparing high and low volatile stocks.
Course: JEFT27.
Authors: Antonious Shalaby & Reis Rexha
Advisor: Benjamin Miller
Key Words: Insider trading, Abnormal Returns, Event Study
Purpose:This study aims to investigate if there is a possibility of achieving abnormal returns foroutsiders on the stock exchange by following insider trading. This is being done with the goalof beating the index and outperforming the majority of the market, which has long been abenchmark for investors who are constantly developing new investment strategies byincorporating new variables of information.
Methodology:The purpose of this study was achieved by utilizing a quantitative approach in conjunctionwith the Event Study model. We distinguished between high and low-volatility companies, asprevious studies had justified this. Subsequently, we conducted statistical tests to determine ifthe results were significant while also exploring the possibility of long-term effects throughseveral calibrations of the event window.
Theoretical perspectives:To conduct this study, considerable attention has been given to prior research in the area,including the theory of the Efficient Market Hypothesis and the concept of Informationasymmetry.
Empirical foundation:The insider trading that was analyzed took place between 2019-2022 in the thirty largesttechnology companies on the Nasdaq Stockholm Stock Exchange. Companies that did notmeet the requirements for the number of data points were excluded from the analysis. In total,twenty-six companies contained sufficient data.
Conclusion:The study showed that there exists a possibility of obtaining abnormal returns. However, it isconstrained. To achieve this, the outsider must buy a highly volatile stock on the day the newswas published and sell it the day after. If the restrictions are not followed, we do not find thatabnormal returns are possible in the study.
2023. , p. 78