Excess Comovement in International Equity Markets: Evidence from Cross-Border Mergers

Posted: 26 May 2009

See all articles by Richard A. Brealey

Richard A. Brealey

London Business School

Ian A. Cooper

London Business School

Evi Kaplanis

London Business School

Multiple version iconThere are 3 versions of this paper

Date Written: May 26, 2009

Abstract

Using a large sample of cross-border mergers we measure the effect of a change in location on systematic risk. When a target firm's location moves a large part of its systematic risk switches from being related to its home equity market to that of the acquirer. On average the change in betas is equivalent to an excess shift of about 0.5 in the target's beta from its home market to that of the acquirer. We test whether the change in systematic risk can be explained by fundamental factors related to changes in the operations of the firm or merger synergy and find that it cannot.

Keywords: International mergers, international equity market integration, stochastic discount factors, international betas, segmented markets, primary listing

JEL Classification: F23, F36, G12, G15, G34

Suggested Citation

Brealey, Richard A. and Cooper, Ian Anthony and Kaplanis, Evi, Excess Comovement in International Equity Markets: Evidence from Cross-Border Mergers (May 26, 2009). Review of Financial Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1409982

Richard A. Brealey

London Business School ( email )

Sussex Place
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London, London NW1 4SA
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+44 207 262 5050 Ext. 3462 (Phone)
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Ian Anthony Cooper (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
+44 171 262 5050 (Phone)

Evi Kaplanis

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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