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. Lastly, chapter three explores the relationship between aggregate exercise of executive stock options (ESO) and stock market volatility. The results suggest that medium insider trades, specifically medium insider buy trades can help predict future stock market returns. We test whether there is information in medium insider trades that can help predict future stock market returns. We also find that a positive shock in aggregate insider trading causes an increase in future stock market returns two months after the shock. This is due to aggregate insidersвЂ™ ability to time the market based on their possession of superior information about unexpected economy-wide changes. The results suggest that there is information in aggregate insider trading that can help predict future stock market returns. We find that only aggregate insider buy trades and medium sized insider trades affect stock market volatility positively.Д¬hapter two re-examines whether aggregate insider trading can help predict future UK stock market returns. 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. 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. Chapter one examines the relationship between aggregate insider trading and stock market volatility. This thesis presents three empirical chapters investigating the informativeness of aggregate insider trading activities in the UKвЂ™s stock and option markets. Stock market volatility Predictive ability of insider trading Private information Stock market returns Informativeness of insider trading Please use this identifier to cite or link to this item:ДЄggregate insider trading activity in the UK stock and option markets

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