Financial media, price discovery, and merger arbitrage

  • Using merger announcements and applying methods from computational linguistics we find strong evidence that stock prices under-react to information in financial media. A one standard deviation increase in the media-implied probability of merger completion increases the subsequent 12-day return of a long-short merger strategy by 1.2 percentage points. Filtering out the 28% of announced deals with the lowest media-implied completion probability increases the annualized alpha from merger arbitrage by 9.3 percentage points. Our results are particularly pronounced when high-yield spreads are large and on days when only few merger deals are announced. We also document that financial media information is orthogonal to announcement day returns.

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Metadaten
Author:Matthias M. M. Buehlmaier, Josef Zechner
URN:urn:nbn:de:hebis:30:3-418707
URL:https://ssrn.com/abstract=2858999
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 551
Series (Serial Number):CFS working paper series (551)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Language:English
Year of Completion:2016
Year of first Publication:2016
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2016/11/01
Tag:Financial Media; Hedge Funds; Market Efficiency; Merger Arbitrage; Mergers and Acquisitions
Issue:February 28, 2016
Page Number:68
HeBIS-PPN:396717586
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universit├Ątspublikationen
Licence (German):License LogoDeutsches Urheberrecht