We extend Kyle's (1985) model of insider trading to the case where liquidity provided by noise traders follows a general stochastic process. Even though the level of noise trading volatility is observable, in equilibrium, measured price impact is stochastic. If noise trading volatility is...

Using a comprehensive sample of trades by Schedule 13D filers, who possess valuable private information when they accumulate stocks of targeted companies, this paper studies whether several liquidity measures reveal the presence of informed trading. The evidence suggests that when Schedule 13D...

We analyze a model of informed trading where an activist shareholder accumulates shares in an anonymous market and then expends costly effort to increase the firm value. We find that equilibrium prices are affected by the position accumulated by the activist, because the level of effort...

This paper studies the long-term effect of hedge fund activism on the productivity of target firms using plant-level information from the U.S. Census Bureau. A typical target firm improves its production efficiency in the three years after an activist intervention, and the improvements are most...

This paper identifies a limit to arbitrage that arises from the fact that a firm's fundamental value is endogenous to the act of exploiting the arbitrage. Trading on private information reveals this information to managers and helps them improve their real decisions, in turn enhancing...