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On the relationship between mergers and economic activity: Evidence from an optimised hybrid method

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  • Cook, Steven
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    Abstract

    A new approach is developed to examine potential causality between merger activity and industrial production. The proposed method combines an information criterion-based approach to lag optimisation with joint maximum likelihood estimation of an autoregressive distributed lag model and GARCH(1,1) specification. Application to UK data provides significant evidence in support of causality between merger activity and industrial production, a result which has been predicted theoretically in the literature but has not received empirical support in earlier research.

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    Bibliographic Info

    Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

    Volume (Year): 379 (2007)
    Issue (Month): 2 ()
    Pages: 628-634

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    Handle: RePEc:eee:phsmap:v:379:y:2007:i:2:p:628-634

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    Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

    Related research

    Keywords: Causality; Mergers; Economic activity;

    References

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    3. Town, R J, 1992. "Merger Waves and the Structure of Merger and Acquisition Time-Series," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages S83-100, Suppl. De.
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    6. Cheung, Yin-Wong & Fujii, Eiji, 2001. " A Note on the Power of Money-Output Causality Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 247-61, May.
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    9. Kang, Heejoon, 1989. "The optimal lag selection and transfer function analysis in Granger causality tests," Journal of Economic Dynamics and Control, Elsevier, vol. 13(2), pages 151-169, April.
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    15. Matthew Rhodes-Kropf & S. Viswanathan, 2004. "Market Valuation and Merger Waves," Journal of Finance, American Finance Association, vol. 59(6), pages 2685-2718, December.
    16. Ralph L. Nelson, 1959. "Merger Movements in American Industry, 1895-1956," NBER Books, National Bureau of Economic Research, Inc, number nels59-1, July.
    17. Shleifer, Andrei & Vishny, Robert W., 2003. "Stock market driven acquisitions," Journal of Financial Economics, Elsevier, vol. 70(3), pages 295-311, December.
    18. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
    19. He, Zonglu & Maekawa, Koichi, 2001. "On spurious Granger causality," Economics Letters, Elsevier, vol. 73(3), pages 307-313, December.
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