Journal article
Assimilation Effects in Financial Markets
Journal of financial and quantitative analysis, pp 1-38
11 Oct 2022
Abstract
Abstract An assimilation bias occurs when people’s evaluative judgment is positively influenced by a previously observed signal. We study this effect by examining investors’ appraisal of M&A deals announced 1 day after other firms in the same 1-digit SIC as the merging parties release earnings surprises. Consistent with assimilation effects, acquirers’ M&A announcement stock return initially correlates with the previous day’s earnings surprises. This effect reverses after 1 week. Assimilation generates other distortions as more positive surprises are related to increases in bid competition, takeover premiums, and withdrawn M&As. Evidence from IPOs corroborates the presence of assimilation effects in financial markets.
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2 citations in Scopus
Details
- Title
- Assimilation Effects in Financial Markets
- Creators
- Eliezer M. FichGuosong Xu - Erasmus University Rotterdam
- Publication Details
- Journal of financial and quantitative analysis, pp 1-38
- Publisher
- Cambridge University Press
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Finance
- Scopus ID
- 2-s2.0-85140258500
- Other Identifier
- 991020542326904721