Use this URL to cite or link to this record in EThOS: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.699256
Title: Aggregate insider trading activity in the UK stock and option markets
Author: Wuttidma, Clarisse Pangyat
ISNI:       0000 0004 5988 8454
Awarding Body: Brunel University London
Current Institution: Brunel University
Date of Award: 2015
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Abstract:
This thesis presents three empirical chapters investigating the informativeness of aggregate insider trading activities in the UK’s stock and option markets. Chapter one examines the relationship between aggregate insider trading and stock market volatility. The results suggest a positive relationship between aggregate insider trading and stock market volatility, confirming the hypothesis that aggregate insider trading increases the rate of flow of information into the stock market which in turn increases stock market volatility. Given that insiders also trade for non-informational reasons, we distinguish between informative and noisy insider trades and examine whether they affect stock market volatility differently. We find that only aggregate insider buy trades and medium sized insider trades affect stock market volatility positively. Chapter two re-examines whether aggregate insider trading can help predict future UK stock market returns. The results suggest that there is information in aggregate insider trading that can help predict future stock market returns. This is due to aggregate insiders’ ability to time the market based on their possession of superior information about unexpected economy-wide changes. We also find that a positive shock in aggregate insider trading causes an increase in future stock market returns two months after the shock. We test whether there is information in medium insider trades that can help predict future stock market returns. The results suggest that medium insider trades, specifically medium insider buy trades can help predict future stock market returns. Lastly, chapter three explores the relationship between aggregate exercise of executive stock options (ESO) and stock market volatility. Insiders in possession of private information may use their informational advantage to trade in the option markets via their exercise of ESOs which may affect stock market volatility. We find that aggregate exercise of ESOs affect stock market volatility positively. This is due to an increase in the rate of flow of information released via private information motivated exercises which cause prices to move as they adjust to the new information thereby increasing volatility. When executives have private information about future stock performance, they are motivated to exercise and sell stocks post exercise to avoid losses. They are also motivated to exercise and sell only a proportion of their stocks, specifically more than 50% of the acquired stocks and they exercise near the money ESOs. We find that for all these private information motivated reasons to exercise ESOs, stock market volatility is positively affected.
Supervisor: Kyriacou, K. ; Costantini, M. Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID: uk.bl.ethos.699256  DOI: Not available
Keywords: Stock market volatility ; Predictive ability of insider trading ; Private information ; Stock market returns ; Informativeness of insider trading
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