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File name: SSRN-id1729942. ; Size: 274K
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Institutional Trades Around Takeover Announcements: Skill vs. Inside Information
Narasimhan Jegadeesh
Emory University - Department of Finance
Yue Tang
University of Florida - Department of Finance, Insurance and Real Estate
December 1, 2010
AFA 2011 Denver Meetings Paper
Abstract:
This paper examines the pattern and profitability of institutional trades around takeover announcements. We find that the trades of funds as a group, either before or after takeover announcements, are not profitable. However, funds whose main broker is also a target advisor are net buyers of target shares before announcements and their pre-announcement trades are significantly profitable. Therefore, leakage of inside information from brokerages that advise the target is a significant source of funds’ informational advantage. We also find that a subset of funds is skilled at privately gathering information even when they do not trade through target advisors.
Number of Pages in PDF File: 40
Keywords: Institutional Trades, Mergers and Acquisitions, Insider Information
JEL Classification: G14, G23
working papers series
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Date posted: March 11, 2010
; Last revised: April 23, 2011
Suggested CitationJegadeesh, Narasimhan and Tang, Yue, Institutional Trades Around Takeover Announcements: Skill vs. Inside Information (December 1, 2010). AFA 2011 Denver Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1568859 or http://dx.doi.org/10.2139/ssrn.1568859
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