The Policy Premium: Do Swedish Ministers Trade on What They Know?

Abstract

This thesis examines whether Swedish Cabinet Ministers achieve abnormal returns on their personal stock transactions and whether portfolio composition differs across political affiliations and departmental oversight. Using disclosure data from 2017–2026, the study combines descriptive portfolio analysis with transaction-level evaluations employing BHAR, CAPM, and Carhart Four-Factor models. The results reveal a strong ideological divergence: left-bloc ministers systematically mitigate risk through mutual funds, whereas center-right ministers exhibit significant direct equity participation, particularly in highly regulated sectors such as Health Care, Financials, and Industrials. A striking performance paradox emerges from the data. While aggregated ministerial portfolios do not systematically outperform the broader market, isolated active transactions exhibit significant, long-term abnormal returns. On average, ministerial purchases generate an alpha of 26.2% over a nine-month horizon, while sales effectively avoid 13.7% in underperformance over a one-year period. However, the data dismantles the narrative of systemic political enrichment. Ministers size individual equities as peripheral bets, meaning that the absolute wealth impact of these trades remains marginal. Furthermore, ministers are not immune to downside risk and exhibit behavioral pitfalls typical of retail investors, including severe underperformance by those with formal financial sophistication. Ultimately, because abnormal returns and high CAGRs are isolated to active trading rather than passive holdings, the findings provide an empirical basis for reforming Sweden's reactive disclosure framework by adopting elements of the "Norwegian model," such as freezing assets, enforcing divestment protocols, or mandating blind trusts