The Price Dynamism during REIT Acquisitions

Kamogelo Molapisi, Pulane Maake () and Nafisa Juma ()
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Kamogelo Molapisi: School of Construction Economics & Management, WITS University, Johannesburg 2050, South Africa
Pulane Maake: School of Construction Economics & Management, WITS University, Johannesburg 2050, South Africa
Nafisa Juma: School of Construction Economics & Management, WITS University, Johannesburg 2050, South Africa

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2024, vol. 27, issue 04, 1-23

Abstract: This study creates, models and calibrates the prices of real estate investment trusts (REITs) within an option pricing framework. Unlike Barraclough et al. [(2013). Using option prices overpayments and synergies in M&A transactions. The Review of Financial Studies, 26(3), 695-772] and Marcato and Sebehela [(2022). The paradoxical prices of options. Review of Pacific Basin Financial Markets & Policies, 25(2), 2250009], this study went further and incorporated new information in the form of news. The results show that for a target (acquiring) firm, the exponential risk premium is made up of the cost of carry plus (less) new news. The same illustration applies equally in a merged entity.

Keywords: Acquisition; option; REIT (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S0219091524500310

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