Thesis
An analysis of corporate insider trading in the UK
- Creator
- Rights statement
- Awarding institution
- University of Strathclyde
- Date of award
- 2000
- Thesis identifier
- T10331
- Qualification Level
- Qualification Name
- Department, School or Faculty
- Abstract
- This thesis examines the impact of corporate insider trading on the financial markets in the UK. Several issues are examined and empirically tested in this context. Corporate insiders are found to earn significantly higher returns from their trading decisions than other investors in the market. Moreover, it appears that regulation which has been imposed by the London Stock Exchange in the form of a model code is ineffective in curtailing the performance of corporate insider trades, although it has definitely affected the timing of their trades. A trading rule was developed based on a simple model and motivated by results in the first two chapters of the thesis. It was found that a strategy using this trading rule (even if there is a delay of five days from the initial insider trade to the mimicking trade) would be profitable. Given the share price performance of firms who have experienced insider trading activity, the relationship between seasonalities in corporate insider trading and stock return seasonalities in the form of the tum-of-the-year effect and the tax-year-end effect was explored. However, no relationship between the two factors was detected. Finally, the inventory control behaviour of dealers around corporate insider trading was examined. It was found that dealer inventory control changed subsequent to insider trades. In addition, the large price movements associated with insider trading activity is found to be as a result of the increase in trading volume because of the market reacting to the trade and not through the information being released by the trade itself. Finally, the analysis has uncovered two main benefits from corporate insider trading that has not yet been mentioned in the literature: arbitrage activity and supplying liquidity. This should enhance the debate on whether corporate insider trading should be as heavily regulated as it currently is.
- Advisor / supervisor
- Marshall, Andy
- Yadav, Pradeep K. (Pradeep Kumar)
- Resource Type
- Note
- Page 162 is missing. Pagination is disrupted between p.180 and p.185, text is continuous.
- DOI
- EThOS ID
- uk.bl.ethos.366752
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