IDEAS home Printed from https://ideas.repec.org/a/oup/revfin/v25y2021i4p997-1046..html
   My bibliography  Save this article

Financial Media, Price Discovery, and Merger Arbitrage
[Who writes the news? Corporate press releases during merger negotiations]

Author

Listed:
  • Matthias M M Buehlmaier
  • Josef Zechner

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.

Suggested Citation

  • Matthias M M Buehlmaier & Josef Zechner, 2021. "Financial Media, Price Discovery, and Merger Arbitrage [Who writes the news? Corporate press releases during merger negotiations]," Review of Finance, European Finance Association, vol. 25(4), pages 997-1046.
    • Handle: RePEc:oup:revfin:v:25:y:2021:i:4:p:997-1046.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/rof/rfaa037
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mentor Lecaj & Granit Curri, 2021. "Advantages Of International Commercial Arbitration In Resolving The Commercial Contests," Perspectives of Law and Public Administration, Societatea de Stiinte Juridice si Administrative (Society of Juridical and Administrative Sciences), vol. 10(2), pages 96-101, June.
    2. Katsafados, Apostolos G. & Leledakis, George N. & Pyrgiotakis, Emmanouil G. & Androutsopoulos, Ion & Fergadiotis, Manos, 2024. "Machine learning in bank merger prediction: A text-based approach," European Journal of Operational Research, Elsevier, vol. 312(2), pages 783-797.
    3. Costa, Evaldo & Rodrigues Teixeira, Ana Carolina & Silva Costa, Suellen Caroline & Consoni, Flavia L., 2022. "Influence of public policies on the diffusion of wind and solar PV sources in Brazil and the possible effects of COVID-19," Renewable and Sustainable Energy Reviews, Elsevier, vol. 162(C).

    More about this item

    Keywords

    Financial media; Merger arbitrage; Hedge funds; Market efficiency; Mergers and acquisitions;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:revfin:v:25:y:2021:i:4:p:997-1046.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/eufaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.