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There is often a tip. Before many big mergers and acquisitions, word leaks out to select investors who seek to covertly trade on the information. Stocks and options move in unusual ways that aren’t immediately clear. Then news of the deals crosses the ticker, surprising everyone except for those already in the know. Sometimes the investor is found out and is prosecuted, sometimes not.

... The professors — Menachem Brenner and Marti G. Subrahmanyam at N.Y.U. and Patrick Augustin at ³ÉÈËVRÊÓƵ — began their study, which won the Investor Responsibility Research Center Institute’s annual investor research competition, two years ago.

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