Aggregate insider trading and stock market volatility in the UK

Guglielmo Maria Caporale, Kyriacos Kyriacou and Nicola Spagnolo

Journal of International Financial Markets, Institutions and Money, 2023, vol. 89, issue C

Abstract: This paper examines the relationship between aggregate insider trading (AIT) and stock market volatility using monthly data on insider transactions by UK executives in public limited companies for the period January 2002 - December 2020. More specifically, a Vector Autoregression (VAR) model is estimated, and impulse response analysis is carried out. The main finding is that higher AIT (more specifically, insider purchases) leads to a short-run increase in stock market volatility; this can be attributed to a combination of insiders manipulating the timing and content of the information they release and the revelation of new economy-wide information to the market. The UK being a well-regulated market, it is plausible that the main driver of the increase in stock market volatility should be the information effect. These results are shown to be robust to using alternative (direct) measures of AIT.

Keywords: Aggregate insider trading; Stock market volatility; VAR; Impulse responses (search for similar items in EconPapers)
Date: 2023
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Working Paper: Aggregate Insider Trading and Stock Market Volatility in the UK (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:89:y:2023:i:c:s1042443123001294

DOI: 10.1016/j.intfin.2023.101861

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