An analysis of intraday market behaviour before takeover announcements
The objective of this study was to analyse the changes in the intraday market microstructure behaviour before a takeover announcement for a sample of target, bidder and control (non-target) companies. Under the hypothesis that agents with asymmetric information were operating in the market, the Autoregressive Conditional Duration (ACD) model was used to estimate the joint impact of duration and microstructure variables on the returns volatility in the months before the event. The analysis was conducted on tick-by-tick data over a period of six to four months, and then three months before an announcement date. Our results suggested that the effect of information on the returns volatility, as measured by several economic and intraday microstructure observable variables, was different between target, bidder and non-target companies leading up to the takeover announcement. These variables were durations between trades, the surprise in durations, spreads and trading volumes. It was concluded that the intraday trading behaviour for takeover targets was affected by traders who held private information (especially the bidders) at least three months before the official announcement of the offer. The selected stocks were traded on the Australian Stock Exchange (ASX) and were sourced between 2004 and 2008 from a wide range of industries and with different levels of liquidity.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Alfonso Dufour & Robert F. Engle, 2000.
"Time and the Price Impact of a Trade,"
Journal of Finance,
American Finance Association, vol. 55(6), pages 2467-2498, December.
- Dufour, Alfonso & Engle, Robert F, 1999. "Time and the Price Impact of a Trade," University of California at San Diego, Economics Working Paper Series qt62c0h04j, Department of Economics, UC San Diego.
- Robert F. Engle & Jeffrey R. Russell, 1998. "Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data," Econometrica, Econometric Society, vol. 66(5), pages 1127-1162, September.
- Joachim Grammig & Kai-Oliver Maurer, 2000. "Non-monotonic hazard functions and the autoregressive conditional duration model," Econometrics Journal, Royal Economic Society, vol. 3(1), pages 16-38.
- Robert N. McCauley & William R. White, 1997. "The Euro and European financial markets," BIS Working Papers 41, Bank for International Settlements.
- Wong, Woon K. & Tan, Dijun & Tian, Yixiang, 2009. "Informed trading and liquidity in the Shanghai Stock Exchange," International Review of Financial Analysis, Elsevier, vol. 18(1-2), pages 66-73, March.
- Meitz, Mika & Teräsvirta, Timo, 2004.
"Evaluating models of autoregressive conditional duration,"
SSE/EFI Working Paper Series in Economics and Finance
557, Stockholm School of Economics, revised 13 Dec 2004.
- Meitz, Mika & Terasvirta, Timo, 2006. "Evaluating Models of Autoregressive Conditional Duration," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 104-124, January.
- Robert F. Engle, 1996.
"The Econometrics of Ultra-High Frequency Data,"
NBER Working Papers
5816, National Bureau of Economic Research, Inc.
- repec:adr:anecst:y:2000:i:60:p:05 is not listed on IDEAS
- Jennings, Robert, 1994. "Intraday Changes in Target Firms' Share Price and Bid-Ask Quotes around Takeover Announcements," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(2), pages 255-70, Summer.
- John H. Boyd & Ross Levine & Bruce D. Smith, 1997.
"Inflation and financial market performance,"
573, Federal Reserve Bank of Minneapolis.
- BAUWENS, Luc & VEREDAS, David, 1999.
"The stochastic conditional duration model: a latent factor model for the analysis of financial durations,"
CORE Discussion Papers
1999058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Luc Bauwens & David Veredas, 2004. "The stochastic conditional duration model: a latent factor model for the analysis of financial durations," ULB Institutional Repository 2013/136234, ULB -- Universite Libre de Bruxelles.
- Foster, F Douglas & Viswanathan, S, 1990. "A Theory of the Interday Variations in Volume, Variance, and Trading Costs in Securities Markets," Review of Financial Studies, Society for Financial Studies, vol. 3(4), pages 593-624.
- Foster, F Douglas & Viswanathan, S, 1995. "Can Speculative Trading Explain the Volume-Volatility Relation?," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 379-96, October.
- Drost, F.C. & Werker, B.J.M., 2001.
"Semiparametric Duration Models,"
2001-11, Tilburg University, Center for Economic Research.
- Easley, David & O'Hara, Maureen, 1992. " Time and the Process of Security Price Adjustment," Journal of Finance, American Finance Association, vol. 47(2), pages 576-605, June.
- repec:inr:wpaper:162228 is not listed on IDEAS
- Easley, David & O'Hara, Maureen, 1987. "Price, trade size, and information in securities markets," Journal of Financial Economics, Elsevier, vol. 19(1), pages 69-90, September.
- Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
- Drost, F.C. & Werker, B.J.M., 2004. "Semiparametric duration models," Other publications TiSEM a1895e3e-f720-454b-9613-f, Tilburg University, School of Economics and Management.
- Diamond, Douglas W. & Verrecchia, Robert E., 1987. "Constraints on short-selling and asset price adjustment to private information," Journal of Financial Economics, Elsevier, vol. 18(2), pages 277-311, June.
- Jabbour, Alain R. & Jalilvand, Abolhassan & Switzer, Jeannette A., 2000. "Pre-bid price run-ups and insider trading activity: Evidence from Canadian acquisitions," International Review of Financial Analysis, Elsevier, vol. 9(1), pages 21-43, February.
- repec:inr:wpaper:152277 is not listed on IDEAS
- Marcus Noland & Sherman Robinson & Zhi Wang, 1997. "The Continuing Asian Financial Crisis," Japanese Economy, M.E. Sharpe, Inc., vol. 25(5), pages 70-95, September.
When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:21:y:2012:i:c:p:23-32. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.