Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/147148
Authors: 
Buehlmaier, Matthias M. M.
Zechner, Josef
Year of Publication: 
2016
Series/Report no.: 
CFS Working Paper Series No. 551
Abstract: 
Using merger announcements and applying methods from computational linguistics we find strong evidence that stock prices underreact to information in financial media. A one standard deviation increase in the media-implied probability of merger completion increases the subsequent 12-day return of a long-short merger strategy by 1.2 percentage points. Filtering out the 28% of announced deals with the lowest media-implied completion probability increases the annualized alpha from merger arbitrage by 9.3 percentage points. Our results are particularly pronounced when high-yield spreads are large and on days when only few merger deals are announced. We also document that financial media information is orthogonal to announcement day returns.
Subjects: 
financial media
merger arbitrage
hedge funds
market efficiency
mergers and acquisitions
JEL: 
G11
G14
G34
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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