The authors study the price—volume dynamics ahead of the first public announcement of a takeover for 420 Canadian firms from 1985 to 2002. Pre-bid price run-ups in a target firm's shares may be caused by some combination of information leakage due to illegal insider trading or market anticipation based on rumours in the press. The authors review empirical studies of illegal insider trading and trading ahead of unscheduled announcements to generate predictions for abnormal returns and abnormal volume ahead of the takeover announcement. They observe serially correlated volume and a pattern of return reversals in their sample. Pre-bid run-ups occur shortly before the actual announcement, accompanied by significantly positive abnormal returns and share volume. The stock prices of the target firm react significantly to the actual announcement, with both positive and negative reactions. These price–volume dynamics are more consistent with the predictions of the market anticipation hypothesis than the hypothesis of illegal insider trading.