We examine derivatives trading prior to takeover rumors in a sample of 1,638 publicly traded U.S. firms. The volume of options traded is abnormally high over the 5-day pre-rumor period, primarily due to the number of out-of-the-money call options traded. In addition, the direction of option...

This paper finds that the majority of stock price movements remain unexplained after controlling for both public and private information. This suggests that economists' inability to explain asset price movements is the result of either noise or naive asset pricing models.

Stock prices occasionally move in response to unverified rumors. I propose a cheap talk model in which a rumormonger's incentives to tell the truth depend on the interaction between her investment horizon and the information acquisition decisions of message-receiving investors. The model's key...

Government agencies routinely allow pre-release access to information to accredited news agencies under embargo agreements. Using high frequency data, we find evidence consistent with informed trading during embargoes of the Federal Open Market Committee's scheduled announcements. The E-mini S&P...