Technology transactions, announcement effect, and reversal: Dissecting an anomaly

Abdelaziz Chazi, Ashraf Khallaf, Yi Liu and Zaher Zantout

The Quarterly Review of Economics and Finance, 2014, vol. 54, issue 3, 371-381

Abstract: We examine the short term stock price performance of firms that acquire or sell technology rights. We find significant positive announcement-period abnormal returns to the acquirers and sellers. However, the price increases reverse during the subsequent twenty trading days. These quick fortune reversals cannot be attributed to methodology; they prevail in the late 1970s through the 2000s, in bear and bull stock markets, and in both high and low technology industries. Upon splitting the sample into two subsamples comprised each of stocks with either pre-announcement price run-up or decline; we find that the abnormal return reversal is confined to the latter subsample. Stocks that witness price run-up prior to the announcement do not reverse to original prices but lose the momentum right after the announcement-period. We believe this is caused by the combination effect of the momentum prior to-and the impact of the announcement.

Keywords: Market efficiency; R&D investment; Intellectual property rights (search for similar items in EconPapers)
JEL-codes: G14 G31 O34 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:54:y:2014:i:3:p:371-381

DOI: 10.1016/j.qref.2014.03.004

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