Open AccessEvent Study on the Reaction of Stock Returns to Acquisition News
Author(s) -
Fotoh Lazarus Elad,
Nko Solange Bongbee
Publication year - 2017
Publication title -
international finance and banking
Language(s) - English
Resource type - Journals
ISSN - 2374-2089
DOI - 10.5296/ifb.v4i1.10409
Subject(s) - econometrics , null hypothesis , stock (firearms) , stock exchange , stock market , simple linear regression , event study , regression analysis , economics , financial economics , regression , business , statistics , mathematics , geography , finance , context (archaeology) , archaeology
This study examines the reaction of stock returns to acquisition news. A data of 51 observations of acquiring companies with publicly traded shares on the London Stock Exchange (FTSE100) is used over a period, from July 2012 to May 2013 with an estimation period [-100, -10] and test period [-5, +5]. The market model is applied here in order to predict future stock returns and the use of the simple regression to get the parameters of the regression equation. With this a test statistics obtained on average, is significantly positive and greater than the critical value. Therefore, the event of acquisition does appear to be related significantly to the abnormal returns and the null hypothesis being rejected.