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