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Merger momentum and investor sentiment: the stock market reaction to merger announcements

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Author Info
Richard J. Rosen
Abstract

This paper examines the effects of mergers on bidding firms’ stock prices. We find evidence of merger momentum: bidder stock prices are more likely to increase when a merger is announced if recent mergers by other firms have been received well (a “hot” merger market) or if the overall stock market is doing better. However, there is long run reversal. Long-run bidder stock returns are lower for mergers announced when the either merger or stock markets were hot at the time of the merger than for those announced at other times.

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Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-04-07.

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Date of creation: 2004
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Handle: RePEc:fip:fedhwp:wp-04-07

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Keywords: Consolidation and merger of corporations ; Stock market ; Prices;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  24. Rhodes-Kropf, Matthew & Robinson, David T. & Viswanathan, S., 2005. "Valuation waves and merger activity: The empirical evidence," Journal of Financial Economics, Elsevier, vol. 77(3), pages 561-603, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mark Bagnoli & Stanley Levine & Susan G. Watts, 2005. "Analyst estimation revision clusters and corporate events, Part I," Annals of Finance, Springer, vol. 1(3), pages 245-265, 08. [Downloadable!] (restricted)
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