Publication details for Dr Michael GuoAntoniou, A. , Guo, M. & Petmezas, D. (2008). Merger momentum and market valuations: The UK evidence. Applied Financial Economics 18(17): 1411-1423.
- Publication type: Journal papers: academic
- ISSN/ISBN: 0960-3107, 1466-4305
- DOI: 10.1080/09603100701720468
- View online: Online version
- Durham research online: DRO record
Author(s) from Durham
- Professor Tony Antoniou
- Dr Dimitris Petmezas
- Dr Michael Guo
This study examines the effect of merger momentum on acquirer's returns both in the short and long-run. The focus is on high valuation markets and the source of momentum is investigated employing three different hypotheses: the neoclassical hypothesis, the hubris hypothesis and the investor sentiment theory. Evidence is provided that supports the investor sentiment (optimism) hypothesis since it is demonstrated that investors earn significant gains in the short run but returns are reversed in the long-run as initial expectations may not be fully met when combined firms' accomplishments become known over time. The results are robust after controlling for several acquirer and deal characteristics.