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An analysis of trading in target stocks before successful takeover announcements

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  • Clements, Marcus
  • Singh, Harminder
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    Abstract

    In this paper we examine both informed and contraire trading preceding successful takeover announcements on US target firms from 2001 to 2006. We find that both informed trading and contraire trading exist within the period preceding successful takeover announcements on the stock market, as evident through abnormal returns and trading volumes and on the option market by analyzing only abnormal trading volume. In regard to contraire trading, we investigate possible explanations for its existence. This study finds, through analysis of an unbiased sample of rumored target firms, that deliberate contraire trading appears to be profitable which is likely an explanation for such trading.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Multinational Financial Management.

    Volume (Year): 21 (2011)
    Issue (Month): 1 (February)
    Pages: 1-17

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    Handle: RePEc:eee:mulfin:v:21:y:2011:i:1:p:1-17

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    Web page: http://www.elsevier.com/locate/mulfin

    Related research

    Keywords: Informed trading Contraire trading Market efficiency Event study;

    References

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    Cited by:
    1. Bouraoui Mohamed Amine, 2013. "Factors influencing the business resumption by physical person in Tunisia," E3 Journal of Business Management and Economics., E3 Journals, vol. 4(11), pages 232-241.

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