Is it possible to earn abnormal returns by following Insiders? A study from Oslo Stock Exchange (OSE)

Abstract

The main purpose of this paper is to study whether it is possible for an outsider to earn abnormal returns by following insider’s transactions. The special focus will be to revise both previous research and Dovre studies by splitting the insider transactions into separate groups according to their respective characteristics. In the center of our study we wish to clarify if there are any informational advantages across industries on the Norwegian Stock Exchange. To do so we studied 1 628 insider trades made on the Norwegian Stock Exchange throughout the period 2011 until 2015. To observe the insider effects we followed in the footsteps of earlier research by applying the same methodology as outlined in MacKinlay (1997). From this we found abnormal returns within some groups, namely industries related to domestic business models along with insider trades related to momentum strategies, and market capitalization. In addition we constructed trading strategies based on these results in order to verify their applications by applying them into actual trades. As a result we did not find any significant alphas. Supporting the conclusion in this study that the Norwegian stock market seem to behave according to the semi-strong efficiency hypothesis.