Exchange Options in the REIT Industry

Advances in Investment Analysis & Portfolio Management, 9, 2019

29 Pages Posted: 12 Oct 2013 Last revised: 1 Dec 2019

See all articles by Gianluca Marcato

Gianluca Marcato

Henley Business School - University of Reading

Tumellano Sebehela

University of the Witwatersrand - School of Construction Economics & Management

Carlos Heitor Campani

The COPPEAD Graduate School of Business - Federal University of Rio de Janeiro (UFRJ)

Date Written: December 1, 2016

Abstract

This article models mergers as exchange options where acquirers offer stocks and/or cash to target firms in exchange of acquiring some shareholding in target firms. Mergers analysed in this article happen between homogeneous entities. The B-S and Margrabe models are used to price cash and stocks (including stocks and cash) deals respectively. The M&A traits are grouped as conflict of interest, market growth, funding and specialisation. Regression results illustrate that exchange options react to M&A characteristics differently. Thus, the results are beneficial to both sell-and buy-side investors in terms on how one manages merging firms. The goodness of fit suggests that strategic acquisitions played important roles.

Keywords: Exchange Option, REIT

JEL Classification: G34, G12

Suggested Citation

Marcato, Gianluca and Sebehela, Tumellano and Campani, Carlos Heitor, Exchange Options in the REIT Industry (December 1, 2016). Advances in Investment Analysis & Portfolio Management, 9, 2019, Available at SSRN: https://ssrn.com/abstract=2339226 or http://dx.doi.org/10.2139/ssrn.2339226

Gianluca Marcato

Henley Business School - University of Reading ( email )

Department of Real Estate & Planning
Reading, RG6 6UD
United Kingdom
+44 (0)118 3788178 (Phone)
+44 (0)118 3788172 (Fax)

Tumellano Sebehela (Contact Author)

University of the Witwatersrand - School of Construction Economics & Management ( email )

1 Jan Smuts Avenue
Braamfontein, Johannesburg 2050
South Africa
+27(0)11 717-7668 (Phone)

Carlos Heitor Campani

The COPPEAD Graduate School of Business - Federal University of Rio de Janeiro (UFRJ) ( email )

Rua Pascoal Lemme n. 355
Rio de Janeiro, 21949-961
Brazil

HOME PAGE: http://www.coppead.ufrj.br

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