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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.

Zhang, Yujie. / "August 2011." / Thesis (M.Phil.)--Chinese University of Hong Kong, 2011. / Includes bibliographical references (leaves 53-56). / Abstracts in English and Chinese. / Abstract --- p.ii / 摘要 --- p.iii / Acknowledgement --- p.iv / Chapter 1. --- Introduction --- p.1 / Chapter 2. --- Institutional background and research hypotheses --- p.8 / Chapter 2.1 --- Rules and regulations in China --- p.8 / Chapter 2.2 --- Ownership structure and corporate governance in China --- p.11 / Chapter 2.3 --- Research hypothesis --- p.13 / Chapter 3. --- Construction of variables and model specification --- p.17 / Chapter 3.1 --- Stock return synchronicity (SYNCH) --- p.17 / Chapter 3.2 --- Insider trading --- p.18 / Chapter 3.3 --- Control variables --- p.21 / Chapter 3.4 --- Ownership structure and corporate governance indicators --- p.23 / Chapter 4. --- Descriptive statistics --- p.30 / Chapter 4.1 --- Insider trading --- p.31 / Chapter 4.2 --- Synchronicity --- p.34 / Chapter 4.3 --- Summary of all variables --- p.35 / Chapter 5. --- Regression analysis --- p.37 / Chapter 5.1 --- Effect of insider trading on stock price synchronicity --- p.37 / Chapter 5.2 --- Effect of insider trading by different identities on stock price synchronicity --- p.39 / Chapter 5.3 --- Effect of insider trading on stock price synchronicity under various corporate governance --- p.42 / Chapter 6. --- Robustness checks --- p.46 / Chapter 6.1 --- insider trading and industry-level return --- p.46 / Chapter 6.2 --- The effect of insider trading on industry vs. firm-specific earnings information --- p.47 / Chapter 7. --- Conclusions --- p.51 / References: --- p.53 / Appendix: Variable definitions: --- p.80

Note: / This thesis is a critical analysis of the law relating to insider trading in three common law countries. Chapter One, addresses the merits and demerits of the regulation of insider trading and presents a review of the academic literature relating to this field. In Chapters Two, Three and Four, the law ofinsider trading in the United States, Canada and the United Kingdom is analysed and discussed on a comparative basis. Each of these chapters is in two sections. The tirst section describes the regulatory system and institutions, and the second section discusses the regulation of insider trading, highlighting the critical elements ofthis type ofregulation, such as the definition of an 'insider' and the scope of 'inside infonnation'. It concludes with a broad discussion of the differing approaches ofthese countries to insider trading. Cette thèse est un analyse critique du délit d'initiés dans trois pays 'common law'. / Dans le premier chapitre, on discute les avantages et les inconvénients de la réglementation du délit d'initiés et la littérature academique rélatif à ce sujet. Dans les Deuxième, Troisième et Quatrième Chapitres on analyse et compare le droit concernant le délit d'initiés dans les Etats-Unis, le Canada et le Royaume-Uni. Chacun de ces chapitres comprend deux parties. La première partie décrit le système réglementaire et les institutions. La deuxième partie discute le droit du délit d'initiés et les éléments critiques de ce droit (par exemple, le définition d'initié et d'information privilegiée). La Conclusion discute les approches différents de ces trois pays quant au délit d'initiés.

No description available.

This thesis is a critical analysis of the law relating to insider trading in three common law countries. Chapter One, addresses the merits and demerits of the regulation of insider trading and presents a review of the academic literature relating to this field. In Chapters Two, Three and Four, the law of insider trading in the United States, Canada and the United Kingdom is analysed and discussed on a comparative basis. Each of these chapters is in two sections. The first section describes the regulatory system and institutions, and the second section discusses the regulation of insider trading, highlighting the critical elements of this type of regulation, such as the definition of an 'insider' and the scope of 'inside information'. It concludes with a broad discussion of the differing approaches of these countries to insider trading.

Note:

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It is unfair to the investing public and detrimental to the interests of the security markets for a person to trade on the basis of inside information. In this short dissertation, the laws regulating insider trading in South Africa prior to the current legislative provisions are briefly discussed. It is found that the old provisions were inadequate in deterring and punishing insider trading activities. The current legislative provisions are analysed in detail. It becomes clear that whilst the current provisions are a substantial improvement on their predecessor, certain aspects need to be reconsidered. These include the widening of their scope to include trading in all kinds of derivatives; the reformulation of the statutory civil action and the empowerment of the securities regulation panel to bring a civil action against insider traders. / Private Law / LL.M.