Quotation Bühlmaier, Matthias, Zechner, Josef. 2020. Financial Media, Price Discovery, and Merger Arbitrage. Review of Finance. 25 (4), 997-1046.




Using merger announcements and applying methods from computational linguistics we find strong evidence that stock prices underreact 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.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Review of Finance
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, STRAT-A, VW-A, WH-A
Language English
Title Financial Media, Price Discovery, and Merger Arbitrage
Volume 25
Number 4
Year 2020
Page from 997
Page to 1046
Reviewed? Y
URL https://academic.oup.com/rof/article/25/4/997/6029022
DOI https://doi.org/10.1093/rof/rfaa037
Open Access N
JEL G11, G14, G34


Spängler IQAM Invest Research Center
Zechner, Josef (Details)
Bühlmaier, Matthias (The University of Hong Kong, China)
Institute for Finance, Banking and Insurance IN (Details)
Research Institute for Capital Markets FI (Details)
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