Informed Trading Around Merger and Acquisition Announcements: Evidence from the UK Equity and Options Markets

摘要

This paper offers new evidence on informed trading around merger and acquisition announcements from the UK equity and options market. The analysis suggests that in about 25-33% of events there is abnormal option trading volume during the month that precedes the announcement. Such evidence is found in both call and put option volumes, is robust to different "estimation" and "event window" lengths, to different sub-samples, and to liquidity considerations. These results support the argument that informed investors will transact in both the options and the stock market, and are comparable to results reported by the FSA in the cash market.