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Anticipation of takeovers in stock and options markets

Dehong Liu, Pei Peter Lung and Justin Lallemand

International Review of Economics & Finance, 2015, vol. 39, issue C, 19-35

Abstract: This paper investigates the information contained in stock and options markets leading up to the public announcement of takeover attempts. The options market demonstrates anticipation of upcoming takeover bids several days before the stock market, as reflected in option-implied stock prices of takeover targets. Moreover, the options-market “lead” over the stock market steadily increases over time as the option market becomes more mature in recent years. These findings suggest that informed investors have migrated from the stock market to the options market.

Keywords: Options; Financial analysts; Price discovery; Informed trading; Neglected firms (search for similar items in EconPapers)
Date: 2015
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