Overreaction to takeover speculation
Interim status: Citation only
Zivney, T. L., Bertin, W. J., & Torabzadeh, K. M. (1996). Overreaction to takeover speculation. The quarterly review of economics and finance, 36(1), 89-115.
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© Copyright 1996 Published by Elsevier Science Inc. All rights reserved.
Examination of 871 takeover rumors published in two columns of the Wall Street Journal during 1985 through 1988 reveals that the market reacts differently to reports on the same page of the Journal. Rumors in the “Abreast of the Market” column are associated with short-term over-reactions, while those in the “Heard on the Street” column exhibit rapid price stabilization following rumor publication. Trading on these overreactions would have resulted in annualized excess returns averaging 20 percent with 70 percent of the trades being profitable. The degree of overreaction appears insensitive to target firm size, percentage of institutional ownership and market (beta) risk.
Terry L. Zivney, Will J. Bertin, and Khalil M. Torabzadeh. "Overreaction to takeover speculation" The quarterly review of economics and finance 36.1 (1996): 89-115.
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