Is the Value Effect due to M&A Deals?: Evidence from the Italian Stock Market

Antonio Roma (antonio.roma@unisi.it)

Department of Economics University of Siena from Department of Economics, University of Siena

Abstract: The paper provides an empirical characterisation of the value effect detected on the Italian Stock Market in the sample period 2000-2018 based on the value premium offered for the acquisition of a value stock. A bid on a value stock generates a large and statistically significant average return on the holding of the target in the deal window, as opposed to bids on growth stocks. Returns on stocks which are the target of a bid accounts for up to two thirds of the average return on the long side of the Fama and French (1993) HML portfolio. The other significant component of the average return of HML is due to the short selling of small growth stocks, which, as evidenced in previous literature, is often difficult to implement from a practical point of view.

Keywords: Fama-French model; value effect; merger arbitrage (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:usi:wpaper:832

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