A theoretical model of directional volume on acquirer stock in cash mergers

Author(s)

Mark W. Zikiye, Zikiye Tactic Nutrition
Rebecca Abraham, Nova Southeastern UniversityFollow
Charles Harrington, Nova Southeastern UniversityFollow

ORCID

Rebecca Abraham 0000-0002-3144-7759

Document Type

Article

Publication Title

Theoretical Economics Letters

ISSN

2162-2078

Publication Date

4-2014

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

https://doi.org/10.4236/tel.2014.43033

Volume

4

Issue

3

First Page

241

Last Page

246

Creative Commons License

This work is licensed under a Creative Commons Attribution-Share Alike 4.0 International License.

NSUWorks Citation

Zikiye, Mark W.; Abraham, Rebecca; and Harrington, Charles, "A theoretical model of directional volume on acquirer stock in cash mergers" (2014). HCBE Faculty Articles. 806.
https://nsuworks.nova.edu/hcbe_facarticles/806