The insider trading and market expectation hypotheses have been proposed to explain the increase in share prices of target firms before their merger announcements. We focus on the market expectation hypothesis by using daily FT coverage as a proxy of a merger expectation and search for relevant articles for 1,059 UK target firms between 1998 and 2010, identifying a total of 1,240 rumour articles. We find that FT coverage can only partly explain the target price run-ups and therefore we support the alternative insider trading hypothesis.
FT Coverage and Target Price Run-ups: Evidence from the London Stock Exchange
PAPA, Marco
2012-01-01
Abstract
The insider trading and market expectation hypotheses have been proposed to explain the increase in share prices of target firms before their merger announcements. We focus on the market expectation hypothesis by using daily FT coverage as a proxy of a merger expectation and search for relevant articles for 1,059 UK target firms between 1998 and 2010, identifying a total of 1,240 rumour articles. We find that FT coverage can only partly explain the target price run-ups and therefore we support the alternative insider trading hypothesis.File in questo prodotto:
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