Does information asymmetry vary between insiders in different industries
Master thesis

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Date
2018Metadata
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- Master of Science [1822]
Abstract
In this master thesis, we examine the level of private information of insiders on
the Oslo Stock Exchange. We contribute to the understanding of the issue by
recognizing how the sector characteristics influence insider return. First, we
allocate each firm into its adjoining sector before we divide the sectors into two
groups, Exogenous and Endogenous. The first group contains insiders in sectors
where exogenous factors steer much of the stock price, while the second group
has insiders in sectors with low exposure towards these factors. By doing so we
hope not only to isolate the sector characteristics, but also to get two groups that is
well-constructed for testing against each other.
We apply a long-term event study of one year, where we investigate the abnormal
return of the two groups. A particular challenge in our long-term study is to
measure the underlying risk between the two groups. This is critical, as even a
small error in risk adjustment could accumulate to significant misrepresentation of
the abnormal return. To control for estimation error, we use a factor model
containing factors that Skjeltorp, Næs and Ødegaard (2011) have shown fits the
Norwegian market.
We conclude that sectors have a large impact on insider’s abnormal return. The
insiders that we classify as Endogenous outperformed the Exogenous group with
5.85%, showing possession of superior predictability. Additionally, if outsiders
where to follow buy trades of the Endogenous group, our results suggest that they
can earn abnormal return. We therefore find support of the weak-form of
efficiency.
Description
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2018