Informational Content of Option Volume Prior to Takeovers*
نویسندگان
چکیده
The capital-allocation role of financial markets rests on the informational efficiency of security prices. For the capital allocation determined by markets to be efficient, it is essential that security prices reflect all relevant information fully and accurately. Then, what types of security markets are the most conducive to price discovery and information incorporation? To investigate these issues, this paper focuses on a particular type of event, merger/takeover announcements, and examines the relative effectiveness of the stock market versus the options market for information and price discovery.
منابع مشابه
Informed Options Trading prior to Takeover Announcements: Insider Trading?∗
We quantify the pervasiveness of informed trading activity in target companies’ equity options before M&A announcements. About 25% of takeovers have positive abnormal volumes, which are greater for short-dated out-of-the-money calls, consistent with bullish directional trading ahead of the announcement. Over half of this abnormal activity cannot be explained by speculation, news and rumors, tra...
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