Our research compares the asymmetric information costs of firms with low levels of institutional ownership to those with high levels. We use self-tender offers as an information event. Our results show that higher institutional ownership, particularly a higher number of institutional investors, is associated with a lower degree of informed trading. These results persist even after we control for differences in trading activity among our sample firms.

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This paper examines the role the options market plays in the dissemination of private information. We find abnormal volume in the options market for three days prior to management forecasts, controlling for concurrent equity volume. Classifying trades as long or short, we find more informed options volume relative to equity volume (1) with relatively greater options market liquidity; (2) when equity is listed on the NYSE or AMEX; (3) for larger surprises; (4) with fewer analysts; (5) for shorter times between the forecast and period end; (6) for good news forecasts; and (7) for smaller percentage institutional holdings. Copyright Blackwell Publishing Ltd, 2004.