Volatility clustering and event-induced volatility: Evidence from UK mergers and acquisitions

Abstract

The paper describes simultaneous tests of the effects of announcements of UK mergers and acquisitions on both the mean and conditional volatility functions for UK bidder firms. Unlike previous research, the entire data set is utilized, thus avoiding researcher-chosen event periods. The cross-sectional test statistics for 745 firms show that the announcement day returns are significantly negative and the conditional volatility decreases. Results suggest that the event studies should incorporate firm-specific time-varying volatility into their abnormal return generating processes and into the tests calibrating the significance of both abnormal return and abnormal volatility around an event.Conditional heteroscedasticity, volatility clustering, event studies, mergers and acquisitions, announcement effects, abnormal performance,

Does the stock market value the inclusion in a sustainability stock index? An event study analysis for German firms

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Switching to floating exchange rates, devaluations, and stock returns in MENA countries

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