HCBE Faculty Articles
Title
A Theoretical Model of Directional Volume on Acquirer Stock in Cash Mergers
Document Type
Article
Publication Date
4-2014
Publication Title
Theoretical Economics Letters
ISSN or ISBN
2162-2078
Volume
4
Issue/Number
3
First Page
241
Last Page
246
Abstract/Excerpt
The acquisition of a target firm in a transaction financed by cash is a cash merger. Announcements of cash mergers release the positive signal that the acquirer possesses cash reserves. As stock prices rise, informed traders may obtain abnormal returns by purchasing call options, selling put options or purchasing stock. This paper constructs a theoretical model in which call buy volume forms the upper bound of the final stock price, put sell volume forms the lower bound of the final stock price and stock purchase volume reveals the final stock price.
DOI
10.4236/tel.2014.43033
NSUWorks Citation
Abraham, Rebecca; Harrington, Charlie W.; and Zikiye, Mark W., "A Theoretical Model of Directional Volume on Acquirer Stock in Cash Mergers" (2014). HCBE Faculty Articles. 806.
https://nsuworks.nova.edu/hcbe_facarticles/806
