This paper offers new evidence on informed trading around merger and acquisition announcements from the UK equity and options market. The analysis suggests that in about 25%-33% of events there is abnormal option trading volume during the month that precedes the announcement. Such evidence is...

We document pervasive informed trading activity in equity options before M&A announcements. About 25% of takeovers have positive abnormal volumes. These volume patterns indicate that informed traders are likely using bullish directional strategies for the target and volatility strategies for the...

Material private information transmits through social networks. Using manually collected information on networks of alumni reunion cohorts, we show that hedge fund managers connected to directors of firms engaged in merger deals increase call option holdings on target firms before deal...

In this paper I examine the relationship between credit rating and insider trading of 301 firms from 2000-2006 for S&P 500 Index firms. I argue that changes to the firm credit rating may increase (decrease) informed trading activities. This investigation is essential since insiders with private...

We analyze how informed investors trade in the options market ahead of corporate news when they receive private, but noisy, information about the timing and impact of these announcements on stock prices. We propose a framework that ranks options trading strategies (option type, maturity, and...

We study whether the trading behavior of corporate insiders provides additional in- formation to the market, after controlling for the public information integrated by sophisticated investors. First, we establish that insiders and option market participants trade in the same direction on...

Option traders are considered among the most informed investors because their trades strongly predict future stock returns. We identify the source of their information edge using a quasi-exogenous shock to insider trading enforcement. With the arrest of Raj Rajaratnam, prosecutors launched an...

We find abnormal volatility spreads in the options market immediately before corporate insider stock trades, suggesting informed options trading prior to insider trades. The informed options trading is more pronounced for large insider trades, firms in more corrupt areas, and insider purchases...

By exploiting the exogenous reductions of analyst coverage due to closures and mergers of brokerage firms, I examine the causal impact of information asymmetry on insider trading. I find that corporate insiders' abnormal returns increase sharply after coverage reductions. This effect is stronger...

We examine insider trading in about 3,700 targets of takeovers announced during 1988-2006 and in a control sample of non-targets, both during an ‘informed' and a control period. Using difference-in-differences regressions of several insider trading measures, we find no evidence that insiders...