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.
| Author: | Matthias M. M. Buehlmaier, Josef ZechnerORCiDGND |
|---|---|
| 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: | Universitätsbibliothek 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: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
