Prediction of Acquisitions and Portfolio Returns

29 Pages Posted: 27 May 2008 Last revised: 26 Feb 2009

See all articles by Georgios Ouzounis

Georgios Ouzounis

WorldQuant LLC

Chrysovalantis Gaganis

University of Crete - Faculty of Social Sciences - Department of Economics

C. Zopounidis

Technical University of Crete (TUC) - Department of Production Engineering and Management

Date Written: February 1, 2008

Abstract

In the last decades the forecasting of acquisitions has been subject to increased interest due to its importance for various stakeholders. This study consists of two stages, dealing with the development of acquisitions' prediction models and their use in an investment strategy. More detailed, in the first stage we explore the ability to predict the acquisition of listed firms in the UK. In the second stage of the analysis we explore whether it is possible to earn abnormal returns by investing in portfolios that consist of the stocks of the predicted targets. The training sample includes 658 listed companies half of which were acquired between 2001 and 2005. The validation sample consists of 1,576 listed firms, from which 416 were acquired during 2006. The results indicate that the portfolios can generate abnormal returns ranging from 1.96% (3 months) to 12.24% (12 months).

Keywords: Acquisitions, investments portfolios, predictions

JEL Classification: G11, G34

Suggested Citation

Ouzounis, Georgios and Gaganis, Chrysovalantis and Zopounidis, Constantin, Prediction of Acquisitions and Portfolio Returns (February 1, 2008). Available at SSRN: https://ssrn.com/abstract=1137966 or http://dx.doi.org/10.2139/ssrn.1137966

Georgios Ouzounis

WorldQuant LLC ( email )

1700 East Putnam Ave, Third Floor
Old Greenwich, CT 06870
United States

Chrysovalantis Gaganis

University of Crete - Faculty of Social Sciences - Department of Economics ( email )

University Campus
Rethymno, Crete, 74100
Greece

HOME PAGE: http://economics.soc.uoc.gr/en/staff/4551/17

Constantin Zopounidis (Contact Author)

Technical University of Crete (TUC) - Department of Production Engineering and Management ( email )

University Campus
Chania
Crete, 73100
Greece
+30 28210 37236 (Phone)
+30 28210 69410, 37236 (Fax)

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