Do Markets React Differently to Insider Purchases and Sales? Evidence from the United States and Sweden

Abstract

This study examines whether equity markets react differently to the public disclosure of insider purchases and insider sales, and whether the magnitude of this asymmetry differs between the United States and Sweden. Using 162,128 insider trade observations from SEC Form 4 filings and Finansinspektionen reports over the matched period July 2016 to December 2023, a short-window event study anchored to the disclosure date and a pooled cross-sectional OLS regression with a difference-in-differences interaction term are employed to test two hypotheses. Both countries exhibit a significant purchase-sale asymmetry: insider purchases generate positive and significant cumulative abnormal returns while sales generate significant negative returns across the primary post-disclosure windows, confirming Hypothesis 1. A finding that departs from the traditional US literature is that insider sales carry significant negative informational content in both markets, consistent with the enhanced timeliness of post-SOX and post-MAR disclosure regimes. Hypothesis 2, which predicts that the asymmetry is larger in Sweden due to higher ownership concentration, is directionally supported by the event study comparisons but not confirmed by the regression after controlling for observable trade characteristics. The most plausible explanation is the absence of firm-level size and valuation controls.