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The Stock Investment Strategy at Company Acquisition

Yu-Wei Lan (), Dan Lin and Lu Lin
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Yu-Wei Lan: Takming University of Science and Technology
Dan Lin: Takming University of Science and Technology
Lu Lin: Takming University of Science and Technology

International Journal of Management Science and Business Administration, 2016, vol. 2, issue 3, 24-32

Abstract: Recent studies in Accounting, Industrial Organizations and Finance often incorporate efficient market hypothesis in event studies. Event studies can be used to examine how changes in company environment affect corporate finance. However, using short-term stock prices to examine mean reversion may face a problem. Specifically, there is no evidence that changes in market values are unbiased estimates of changes in fundamentals. This study adopts program trading to test the mean reversion of an acquisition event (SPIL and ASE Group) between 2015 and 2016 in Taiwan. The results show that investors can use RSI spread and stock price deviation to make abnormal returns. In other words, investors can make profits based on technical analyses. Therefore, the evidence suggests that between 2015 and 2016, the security market in Taiwan did not fully meet the condition of a semi-strong form efficient market.

Keywords: Mean reversion; Program trading; Granger Casualty Test; Efficient market; Acquisition (search for similar items in EconPapers)
JEL-codes: M00 (search for similar items in EconPapers)
Date: 2016
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