Clearly Heard on the Street: The Effect of Takeover Rumors on Stock Prices
This article examines the effects of takeover rumors on stock prices using a sample of rumors published in the WALL STREET JOURNAL's "Heard on the Street" column. We find that the market reacts efficiently to rumors; simple trading strategies based on buying or selling rumored targets' stocks yield zero excess returns. We document a significant price run-up for rumored targets in the month before publication of the takeover rumor. We find that widespread takeover rumors accurately predict imminent takeover bids less than half the time. Finally, we find that most takeover rumors are preceded by unusual price and volume activity in the stock of the rumored target, which may stimulate speculation that a large block position is being accumulated. Copyright 1990 by the University of Chicago.
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.
When requesting a correction, please mention this item's handle: RePEc:ucp:jnlbus:v:63:y:1990:i:3:p:291-308. 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: (Journals Division)
If references are entirely missing, you can add them using this form.