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Does information asymmetry vary between insiders in different industries

Schønning, Erlend; Vatne, Olav Adrian Ødegård
Master thesis
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2040464.pdf (2.449Mb)
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http://hdl.handle.net/11250/2578497
Utgivelsesdato
2018
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Samlinger
  • Master of Science [1116]
Sammendrag
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.
Beskrivelse
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2018
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Handelshøyskolen BI

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