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Price Pressure Around Mergers
Mark L. Mitchell CNH Partners Todd C. Pulvino Northwestern University - Kellogg School of Management Erik Stafford Harvard Business School July 2002 Harvard NOM Working Paper No. 02-22 HBS Finance Working Paper No. 03-029 Abstract: This paper examines the trading behavior of professional investors around 2,130 mergers announced between 1994 and 2000. We find considerable support for the existence of price pressure around mergers caused by uniformed shifts in excess demand, but that these effects are fairly short-lived, consistent with the notion that short-run demand curves for stocks are not perfectly elastic. We estimate that roughly one half of the negative announcement period stock price reaction for acquirers in stock-financed mergers reflects downward price pressure caused by merger arbitrage short selling.
Keywords: Mergers, Short-selling, Arbitrage, Price Pressure, Downward Sloping Demand Curves JEL Classifications: G1, G3 Working Paper SeriesDate posted: July 25, 2002 ; Last revised: August 28, 2002Suggested CitationContact Information
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