EAN: 9783954891726

THE NATURE OF INFORMED OPTION TRADING EVIDENCE ...

This study examines the kind of information informed traders have prior to a takeover
announcement using options of target firms and elaborates on the cross-sectional relationship
between options and stocks around takeover announcements. Financial markets are driven by
information and by individuals that generate  process  and disclose this information to the
market. Naturally  there have to be individuals who possess more information about a firm or a
future event than other market participants. Mergers and acquisitions are particularly
interesting events in this regard because they can have significant implications for the firms
and stakeholders involved  as well as for the competitive dynamics in the respective market.
Because of the large potential price impact of such transactions  traders with private
information about a prospective takeover are expected to trade on this information to make a
profit. But who are these informed traders and what kind of information do they possess? This
study tries to give a respond to this question.

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