Article
A Theoretical Model of Directional Volume on Acquirer Stock in Cash Mergers
Theoretical Economics Letters
ORCID
Rebecca Abraham 0000-0002-3144-7759
Document Type
Article
Publication Date
4-1-2014
Abstract/Excerpt
The acquisition of a target firm in a transaction financed by cash is a cash merger. Announcements of cash mergers release the positive signal that the acquirer possesses cash reserves. As stock prices rise, informed traders may obtain abnormal returns by purchasing call options, selling put options or purchasing stock. This paper constructs a theoretical model in which call buy volume forms the upper bound of the final stock price, put sell volume forms the lower bound of the final stock price and stock purchase volume reveals the final stock price.
DOI
https://doi.org/10.4236/tel.2014.43033
Disciplines
Citation Information
Rebecca Abraham, Charlie W. Harrington and Mark W. Zikiye. "A Theoretical Model of Directional Volume on Acquirer Stock in Cash Mergers" Theoretical Economics Letters Vol. 4 Iss. 3 (2014) p. 241 - 246 ISSN: 2162-2078 Available at: http://works.bepress.com/charlie-harrington/1/