Does option provide more informative content than stock after regulation fair disclosure?

This article examines the impact of Regulation Fair Disclosure (Reg FD), which intends to eliminate selective disclosure to only a few privileged interested parties, on the information embedded in the stock-and-option markets prior to tender offer announcements. In the pre-announcement period after Reg FD, the volume of public option information contains less information about subsequent stock price movements. Although the quantity of public information may be higher after Reg FD, the inferior quality of publicly available option information dominates the higher quantity. Thus, the predictive power of option information decreases. In the post-RFD pre-announcement period, the volume of public option information is more informative than the volume of stock private information. It indicates that although the quality of private stock information is superior to that of public option information, the much lower quantity of stock information results in a lower predictive power of private stock information than that of public option information.