Legal insider trading and stock market reaction:Evidence from the Netherlands

This paper provides an analysis of legal insider trading on the Euronext Amsterdamstock exchange by using data published in the register held by the AFM, the dutchfinancial markets authority. The sample includes 822 transactions executed bycorporate insiders between the beginning of January 1999 and the end of September2005. Our analysis shows that the financial markets' response is not significant forpurchases, and that the abnormal returns associated with the sales do not have theexpected sign. However, over a longer time horizon, the average cumulativeabnormal returns are positive for the stocks purchased, and negative for stocks soldby insiders. This result suggests either that insiders use long-term information fortheir trading activities or that they are able to time the market....