i Summary Previous studies have indicated that information asymmetries exist on the financial markets. People with access to non-public information could use that information to their advantage when they trade financial instruments. The Swedish Financial Supervisory Authority (FI) is a public authority that works for stability and efficiency on the financial market. In their work for achieving an efficient market is FI trying to minimize the information asymmetries on the market by keeping a record of all trades being done by what the Swedish law classifies as insiders. The record is public information and a way to inform the market about insider transactions, which creates the question: Can the public information on insider trades kept by FI help an investor to make better investments? Yes, it can! In order to examine the question have we performed event studies on different trading strategies that have been based on information from previous studies in the field. The event studies have focused on insider purchases in Small Cap and Mid Cap companies on the Stockholm Stock Exchange during [2007][2008][2009]. We choose to focus on insider purchases because of its higher relevance for other investors than insider sales. Insiders have several reasons to sell shares in their company, for example portfolio diversification and liquidity needs, but they have one main reason to buy shares, to earn money on their investment. We created and tested three different trading strategies based on the insider purchases executed during 2007-2009. The first trading strategy was based on periods of intensive trading, the second strategy was based on large volume transactions and the third strategy was based on short periods of intensive trading where small purchases were excluded. The first two strategies were applied on Small Cap and Mid Cap separately, while the third strategy was applied on the Small Cap only. We have been using a well-established and highly referenced way to perform our event studies. To be able to test the average development statistically have the returns been aggregated through time and through securities. The trading strategies have been tested over 5, 10, 30 and 90 day periods. The results that we have found indicate that outsiders have a possibility to earn abnormal returns in small companies by using the information provided by FI. The strongest positive result that we attained by our tests was an 1.367% cumulative average abnormal return (CAAR) for a 5 day period with the intensive trading strategy on Small Cap companies. It was surprising that all the tests executed showed negative abnormal return over 30 and 90 days, with some of them being negative statistically significant. The results imply that the trading strategies would not be successful for a time-period over 30 and 90 days. The large volume transaction strategy and the third strategy for Small Cap companies did not result in any statistically significant results but showed positive development for 5 day event periods. We conclude through our study that reported insider trading is valuable for outsiders investing in small companies over short time-periods. The results that we found indicate that smaller companies are less efficiently priced than larger companies. i
