We consider Kyle’s market order model of insider trading with multiple informed traders and show: if a linear equilibrium exists for two different numbers of informed traders, asset payoff and noise trading are independent and have finite second moments, then these random variables are normally distributed. Journal of Economic Literature Classification Numbers: C62, D82, G14.

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...

We find that pre-announcement implied volatility spreads and options trading activity are abnormally elevated can predict Food Drug Administration (FDA) announcement date stock returns. The effect is more pronounced in firms with higher levels of information asymmetry lower-quality corporate governance suggesting some traders informed advance the details affect price impact FDA news. provide fi...

Using a rational expectations equilibrium framework, I evaluate the effects of short-sale prohibition in an economy with asymmetrically informed investors who are identical except for their information sets. Relative to which short selling is permitted, financial market less informationally efficient under ban even when not binding. This alters risk-sharing environment and leads increase acquis...

We find that accruals mispricing is more pronounced for stocks with higher level of probability of informed trading (PIN). We interpret it as the evidence of informed traders using their proprietary information on accruals quality to trade against average investors. The informed traders’ arbitrage generates an annualized size and book-to-market adjusted abnormal return of 19.81% over the 1993-2...