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1.
This paper examines the behavior of option implied standard deviations around merger and acquisition announcements. The implied standard deviations of target firms increase significantly three days prior to the announcement. The bidding firm implied standard deviations are not affected. The analysis is extended to the equity market to determine which market reacts first to the merger or acquisition announcement. Target firm equity abnormal returns and residual variances increase significantly one and two days, respectively, prior to the announcement.  相似文献   

2.
This paper investigates the information content of options trading prior to dividend change announcements. I find a positive (negative) relation between pre‐announcement abnormal implied volatility (IV) spread (abnormal IV skew) and cumulative abnormal stock returns around dividend change announcements. The predictive power of informed options trading is stronger for announcements of dividend reduction and when the options market is more liquid relative to the stock market and weaker when information has already been incorporated in the stock market. The predictability of informed options trading is robust to a placebo test and alternative measures of informed options trading. Overall results suggest that informed options trading predicts dividend change announcement returns.  相似文献   

3.
This paper analyzes informed trading in acquiring firms through (stock) merger announcements. We show that pre-announcement abnormal option volumes in acquiring firms strongly increase ahead of a stock merger (by approximately 300%). Furthermore, we show that the direction of option trades (puts or calls) prior to an announcement can predict post-announcement stock returns. Our results also indicate that higher wealth-to-performance sensitivities of top executives are related to higher abnormal put than call option trading before stock merger announcements. Overall, our results support the view that top executives have a hedging motive. They tend to purchase protection against, e.g., confounding (negative) information policies and/or empire-building mergers with negative NPVs, in order to avoid short-term salary losses (lower bonuses, lower stock options, etc.).  相似文献   

4.
This paper provides evidence of excess returns earned by investors in acquired firms prior to the first public announcement of planned mergers. The study is distinguished from earlier merger studies in its use of daily holding period returns for the 194 firms sampled. The results confirm statistically what most traders already know. Impending merger announcements are poorly held secrets, and trading on this nonpublic information abounds. Specifically, leakage of inside information is a pervasive problem occurring at a significant level up to 12 trading days prior to the first public announcement of a proposed merger.  相似文献   

5.
We track trading activity in the days preceding acquisition announcements for target firms and find that abnormally high trading volume precedes significant price movement. Using additional intraday data, we find increased active-selling in target stocks before acquisition announcements that offsets increased active-buying. This is unexpected because sellers often lose money when an acquisition is announced. After ruling out alternative explanations, we find evidence that sellers are rational investors who trade on the market??s perceived overreaction to takeover rumors. While sellers lose money when a rumor precedes an actual announcement, in most cases rumors fail to materialize into public announcements. We provide evidence that the significant pre-announcement volume we document reflects the market??s processing of highly uncertain information in takeover rumors.  相似文献   

6.
This paper investigates the primary and secondary syndicated bank loan market to analyze the effect on pricing when the financial institution commingles syndicated lending with merger advisory services. In particular, we investigate the connection between the acquirer’s choice of financial advisor in a merger and future financing commitments. We find evidence of underpricing of syndicated bank loans in both the primary and secondary market. In the primary market, we show that non-acquisition loans granted by merger advisors to acquiring firms after the merger announcement date are charged a lower all-in-spread relative to acquisition loans if there has been a prior lending relationship. Consistent with this finding, we find that syndicated bank loans for non-acquisition purposes arranged by the acquirer’s advisor after the merger announcement date trade in the secondary market at a significant discount. Since the terms on these non-acquisition loans are not set upon merger announcement, they are most subject to risk shifting and underpricing agency problems. These findings offer evidence consistent with the existence of loss leader and potentially conflicted loans (priced at below-market terms) that are offered by the acquirer’s relationship bank advisor in order to win merger advisory business.  相似文献   

7.
A sample of 128 Canadian acquisitions from 1985 through 1995 is used to examine the relationship between pre-bid price run-ups in target shares and insider trading activity. We find that abnormal stock price performance at an early stage before the acquisition announcement is due to actual trading by corporate insiders. However, the run-up immediately preceding the takeover announcement appears due to market anticipation about an impending bid for the target. Furthermore, our results identify the stages in the acquisition process at which each effect occurs.  相似文献   

8.
Stock splits have long presented financial puzzles: Why are they undertaken? Why are they associated with abnormal returns? Abnormal returns, particularly those coming shortly before a split’s announcement date, should raise strong suspicions of insider trading, particularly in nations with weak regulatory structures. We examined the 718 split events in the emerging stock market of Vietnam from 2007 through 2011. We found evidence consistent with illegal insider trading, particularly in firms that were vulnerable to insider manipulation and, therefore, more likely to split their stocks. When vulnerable firms’ stocks did split, they provided significant excess short-term returns. Tellingly, the abnormal returns on those stocks prior to the split announcements were also extremely high, indeed higher than their abnormal post-announcement returns. Moreover, trading volume increased prior to the split announcement date. This suspicious pattern is what we would expect if insiders were trading on their knowledge. We propose that illegal insider trading in contexts where it is possible to escape serious penalty provides a previously undiscussed and cogent explanation for both stock splits and abnormal short-term returns.  相似文献   

9.
Using a sample of cash tender offers occurring between 1993 and 2002, we find evidence that the options market has become the preferred venue for traders attempting to profit on anticipated announcements. Options offer advantages relative to stocks. Traders gain leverage by trading in options and multiple options contracts on an individual stock. The results of our study indicate that a substitution effect does exist. Abnormal volume in the option market replaces abnormal volume in the stock market prior to cash tender offer announcements, and this abnormal option volume precedes abnormal stock volume for targets with or without traded options.  相似文献   

10.
This study investigated whether there is informed trading that takes advantage of data breach events. By analyzing the transactions in the options market, we conjectured that there are two distinct informed trading patterns: one that begins approximately 4 months prior and another that begins 8–12 months before the corporate data breach announcements. This is supported by evidence of higher trading volume and open interest for put options, a higher put-to-call volume ratio, a higher put-to-call open interest ratio, and lower spreads prior to such announcements. We also examined the stock reactions following data breach announcements and found significantly negative cumulative abnormal returns of −0.35% within one day. Moreover, a cross-sectional analysis showed that put-call ratios have predictive power for stock returns. Finally, additional evidence, such as trading strategies in the stock and options markets, is provided.  相似文献   

11.
We show that local investor attention, as a proxy for the arrival rate of informed trading, has an impact on post-earnings announcement drift. Measured by monthly abnormal Google search volume before the earnings announcement, high (low) local investor attention is associated with weak (strong) delayed market reaction to the earnings announcement and strong (weak) abnormal trading volume in the pre-earnings announcement period. The evidence documented in this paper supports both “rational structural uncertainty” and attention allocation theories that argue that information distribution among investors plays an important role in explaining market anomalies.  相似文献   

12.
We examine the effect of options trading volume on the stock price response to earnings announcements over the period 1996–2007. Contrary to previous studies, we find no significant difference in the immediate stock price response to earnings information announcements in samples split between firms with listed options and firms without listed options. However, within the sample of firms with listed options stratified by options volume, we find that higher options trading volume reduces the immediate stock price response to earnings announcements. This conforms with evidence that stock prices of high options trading volume firms have anticipated and pre-empted some earnings information in the pre-announcement period. We also find that higher abnormal options trading volume around earnings announcements hastens the stock price adjustment to earnings news and reduces post-earnings announcement drift.  相似文献   

13.
Hung Wan Kot 《Pacific》2011,19(2):230-244
Stock price reactions and long-run performance after a corporate name change are investigated using a sample of Hong Kong listed companies spanning 1999 to 2008. Corporate name changes are classified into four types. Investors react positively around the announcement date to changes announced as being due to a merger or acquisition, a restructuring or a change in business type. Name changes to provide clarity or for reputational reasons generate no stock price reaction. No abnormal trading activity is detected around the announcement and in the post-event period. There is very weak evidence of a relationship between long-run abnormal stock returns, operating performance changes and corporate name changes. The results suggest that name changes have short-term stock price effects but no long-term relationship with stock price or operating performance.  相似文献   

14.
This study examines options’ market behavior before analysts’ initiations. We find abnormal trading activity in the options market several days prior to the release of analysts’ initiations. Informed traders recognize the content and timing of the initial recommendations. We determine that informed trading is attributed to information leakage rather than savvy investors’ stock‐picking ability. We also find a significant information transmission from the options market to the underlying equity market around the event. Our results are consistent with the tipping hypothesis and confirm the informational role of equity options.  相似文献   

15.
This paper investigates market efficiency of the Jamaica Stock Exchange (JSE). Together, weak and semi-strong form efficiency claim that historical and newly released public information do not predict future stock price movement. We test both forms of market efficiency by analyzing stock price behavior during times of abnormal trading volume and around the release dates of earnings information. Abnormal trading volume may be driven by liquidity demand or reflect new or private information flow to the market. Using JSE data over the period 2000 to 2021, we find price dynamics consistent with price pressure as firms experience negative abnormal returns on the day of abnormal trading activity but offsetting positive abnormal stock returns on the following day. Further findings show post earnings announcement drift on the JSE. Taken as a whole, the evidence suggests violations of market efficiency and has implications for capital allocation in this emerging market.  相似文献   

16.
Hong and Yu (2009) document a significant decrease in trading volume and returns during the summer months. Given the tendency of noise traders to buy shares following both positive and negative earnings surprises (Lee, 1992), we hypothesize that reduced trading activity by noise-traders results in less of an earnings announcement premium during the summer. Consistent with our hypothesis, we find lower abnormal returns surrounding summer earnings announcements compared to non-summer announcements. We also find lower abnormal returns in the ten days prior to the announcement, consistent with less front-running by sophisticated investors. Finally, we show that these summer effects are stronger in recent years characterized by more online trading and greater noise trader participation.  相似文献   

17.
This paper studies the price‐volume dynamics ahead of takeover announcements for 399 Canadian firms from 1985 to 2002. I find evidence consistent with insiders trading illegally, creating both abnormal returns (ARs) and abnormal turnover (AT) ahead of the announcement. The rise in AT begins far ahead of the actual announcement, accompanied by ARs in the last five trading days, consistent with more informed trading. Data on disclosed insider trading indicate a sharp increase in volume prior to the takeover announcement, suggesting that insiders make use of private information. This study confirms the importance of AT for triggering an insider trading investigation.  相似文献   

18.
In this paper we explore price and volume effects associated with the 1991 creation of Standard & Poor's MidCap 400 index. Prior work on changes in the composition of existing indices finds a significant price response to the announcement. Various authors link the effect to price pressure, information, an outwardly shifting demand curve for securities, and the increased attention that comes with inclusion in an index. Using event study methodology, we find significant price and volume effects during the two weeks leading up to the Standard & Poor's announcement, but no significant effect in the two-day interval around the event. Apparently, information leakage and/or anticipation preceded the creation of the index. The price run-up is permanent since the positive abnormal returns leading up through the announcement are not associated with significantly negative abnormal returns after the announcement. In addition, MidCap stocks significantly outperform the market during the fifty-two weeks following the announcement. Using cross-sectional regressions, we show that these prior-period abnormal returns are positively related to abnormal volume and institutional holdings. We also find that firms trading over-the-counter had larger price run-ups than NYSE or AMEX firms.  相似文献   

19.
The wealth effects for shareholders of American financial firms involved in foreign acquisitions and also the wealth effects for shareholders of U.S. target firms acquired by foreign concerns are the topics of this study. The findings indicate that stockholders of U.S. bidding financial firms (and its subset of banks) earn neither abnormal gains nor suffer abnormal losses upon the announcement of an acquisition or regulatory approval. On the other hand, stockholders of U.S. target financial firms (and its subset of banks) earn significant abnormal profits at both the announcement of the proposed acquisition and the announcement of regulatory approval of the acquisition. The wealth effects for these two samples are also compared to samples in which both parties to the acquisition are U.S. firms. The research suggests that there is no significant difference in the size of the announcement gains or losses for either stockholders of the target or bidding firms based on whether the acquisition is foreign or domestic. These findings conflict with prior research which indicates that, for firms in general, stockholders of U.S. targets earn significantly greater wealth benefits when they are acquired by foreign firms than by domestic firms. Overall, these results are consistent with a competitive market for acquisitions of financial firms in which buyers do not earn or lose at the announcement of an acquisition, and in which abnormal gains are received only by the sellers.  相似文献   

20.
This study examines the impact of company responses to trading‐induced queries made by the Australian Securities Exchange over the period January 2007–December 2008, inclusive. We utilise event study methodology and a matched sample approach to assess the impact of trading query announcements. We use multivariate analysis to investigate any cross‐sectional determinants affecting abnormal returns and volume, and find significant positive shareholder wealth and volume effects associated with query announcements. Further, the unexplained abnormal returns observed prior to the announcement of the trading query persist post‐announcement. Subsequent analysis reveals the industry effect reported in the literature loses significance after accounting for sample selection bias.  相似文献   

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