The large theoretical literature about bubbles includes models where naive individuals cause excessive price movements and smart money trades against (and potentially eliminates) a bubble or where sophisticated investors follow market prices and help drive a bubble. We examine these competing...

This paper examines the information embedded in both the stock and option markets prior to takeover announcements. During normal periods, buyer-seller initiated stock volume imbalances are significant predictors of next-day stock returns and option volume imbalances are uninformative. However,...