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Market anticipation of merger activities: An empirical test
Author(s) -
Jayaraman Narayanan,
Mandelker Gershon,
Shastri Kuldeep
Publication year - 1991
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090120605
Subject(s) - anticipation (artificial intelligence) , economics , test (biology) , financial economics , empirical evidence , econometrics , business , monetary economics , computer science , philosophy , paleontology , epistemology , artificial intelligence , biology
This paper empirically examines the possibility that there is leakage of information regarding a merger prior to the announcement of the first bid for the target firm. The tests for the existence of market anticipation are based on the behavior of variances implied in the premia of call options listed on the target firms' stocks. We conclude that the evidence is consistent with the hypothesis that the market anticipates an acquisition prior to the first announcement.