Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/274975 
Year of Publication: 
2022
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 15 [Issue:] 10 [Article No.:] 455 [Year:] 2022 [Pages:] 1-21
Publisher: 
MDPI, Basel
Abstract: 
In this paper, I study trading activities prior to M&A announcements pertaining to the rivals of the merging firms. I find that not only acquirers and targets experience increases in abnormal trading activities in stock and option markets, but also their rivals. The rise in option trading is especially strong for options that informed traders are most likely to trade. I find that the implied volatility spread (IV spread) constructed from a rival's option prices the day before the announcement can predict this rival's cumulative abnormal return (CAR) over the M&A announcement window. As the IV spread is widely adopted as a proxy for informed trading activities in the option market, my findings provide evidence for information spillovers from merging firms to their rivals prior to the announcements of the M&A deals.
Subjects: 
information spillover
option trading
M&A
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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