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,...

Which market attracts informed investors prior to extreme informational events? We examine the information embedded in the stock and option markets prior to takeover announcements. Normally, buyer-seller initiated stock volume imbalances are predictors of next-day stock returns and option volume...