Abstract
This study analyzes changes in stock price behavior surrounding acquisition announcements. I develop a theoretical model incorporating the market’s ability to process information when an acquisition occurs in the context of the efficient market hypothesis. I then empirically test the market’s capacity for internalizing information through proxies of search engine traffic and news mentions on price behavior before and after the announcement date. Tracking first differences and controlling for firm, year, industry, and market characteristics, when investors are uncertain about a stock’s value after an acquisition, they increase their search for information with consequences on both price and variance. These results support only semi-strong efficiency since investors fail to immediately interpret and agree on the information set.
Advisor
Histen, Joe
Department
Business Economics
Recommended Citation
Johnson, Levi, "Information Processing in Acquisition Announcements: Reframing the Efficient Market Hypothesis" (2021). Senior Independent Study Theses. Paper 9487.
https://openworks.wooster.edu/independentstudy/9487
Publication Date
2021
Degree Granted
Bachelor of Arts
Document Type
Senior Independent Study Thesis
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