Opportunistic Insider Trading and Earnings Announcements: A Swedish Market Study, 2017–2024

Abstract

The study covers a deep investigation and analysis of insider trading within a unique regulatory gap in the Swedish stock market: the period right before the silent period and at the end of the quarter. The main hypothesis posits that high executives who trade their company’s stock during this window are able to generate risk-adjusted abnormal returns with non-public information in possession. It is also tested if the effect is bigger in smaller companies. The study is founded on a quantitative methodology with a short-term event study approach. It includes both cumulative abnormal return calculations as well as multiple regressions. Everything with the purpose of detecting patterns around the quarterly report release. The data is sourced from the Swedish Financial Supervisory Authority and S&P Capital IQ. It spans from 2017 to 2024. The findings suggest that insider purchases within 60 days of the quarterly release are associated with statistically significant abnormal returns. The effect is particularly distinct among small and mid-cap firms. The conducted regression analysis confirms this view and indicates that these trades are predictive of positive stock performance. Regarding the insider sales, the evidence of a significant negative abnormal return was weaker and more context dependent. It showed a bigger variation in results and not as clear. The study is a contributor to already existing studies by introducing a new angle of incidence when choosing this particular regulation gap and time period. The study contributes by presenting evidence from the Swedish market, which has received less attention in the existing literature. It confirms that information asymmetry is a vital component in driving abnormal returns and also points out current limitations in the regulation.