RT Journal Article SR Electronic T1 The Decline of Informed Trading in the Equity and Options Markets JF The Journal of Alternative Investments FD Institutional Investor Journals SP jai.2018.1.064 DO 10.3905/jai.2018.1.064 A1 Charles Cao A1 David Gempesaw A1 Timothy Simin YR 2018 UL https://pm-research.com/content/early/2018/08/22/jai.2018.1.064.abstract AB Reliable excess returns from active portfolio management derive from informed trading. This article investigates the information content of informed trading in the equity market and the options market. The authors find that informed equity trading and options trading are positively correlated in the time series but virtually uncorrelated cross sectionally. Portfolio-level and stock-level analyses provide robust evidence that the cross-sectional return predictive power of informed trading in each market is distinct. Time-series analyses indicate that aggregate informed options trading is useful for predicting market returns but that the amount of informed trading has declined significantly in more recent years. The time-series patterns of both informed trading measures coincide closely with the decline in equity hedge fund excess returns.