Bühlmaier, Matthias, Zechner, Josef. 2020. Financial Media, Price Discovery, and Merger Arbitrage. Review of Finance.
BibTeX
Abstract
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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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-C, WH-A |
Language | English |
Title | Financial Media, Price Discovery, and Merger Arbitrage |
Year | 2020 |
Reviewed? | Y |
URL | https://academic.oup.com/rof/advance-article-abstract/doi/10.1093/rof/rfaa037/6029022 |
DOI | https://doi.org/10.1093/rof/rfaa037 |
Open Access | N |
JEL | G11, G14, G34 |
Associations
- Projects
- Spängler IQAM Invest Research Center
- People
- Zechner, Josef (Details)
- External
- Bühlmaier, Matthias (The University of Hong Kong, China)
- Organization
- Institute for Finance, Banking and Insurance IN (Details)
- Research Institute for Capital Markets FI (Details)