Insider timing on the Stockholm Stock Exchange : A study of short-term cumulative returns prior to mid-cap CEOs’ transactions in their own firm

Sammanfattning: This paper investigates how CEOs in public Swedish mid-cap corporations time their transactions in their own company’s stock in a short-term perspective. To investigate this, an event study methodology is employed on cumulative returns surrounding these insiders’ transactions, both absolute and relative to the market. We find that these insiders, on average, purchase stock subsequent to a period of decline in both total and abnormal cumulative returns and sell stock following a period of positive total and abnormal returns. This is in line with our hypotheses. We also find that total and abnormal cumulative returns tend to turn and increase for a short period following a purchase transaction, while for a sale transaction, the trend does not turn but continues upward, implying that purchases may be timed more rigorously in the short run than sales. This paper discusses these observations in connection to earlier findings and motivates further research on the subject of insider transaction timing.