Quarterly publication of the Multinational Finance Society, a non-profit corporation ISSN 1096-1879
What are the Causes and Effects of M&As? The UK Evidence
(Multinational Finance Journal, 2012, vol. 16, no. 1/2, pp. 1-27)
Jie (Michael) Guo
Durham University, U.K.
University of Surrey, U.K.
This paper examines the link between the causes and effects of mergers and acquisitions. By using a sample of UK acquisitions, which have the distinct characteristics of limited use of stock as means of payment and dominance of private acquisitions, the evidence shows that, on average, there is a substantial price run-up for acquirers prior to an acquisition announcement followed by a significant drop of bidder's price in the post-event period. This indicates, to an extent, that corporate acquisitions are the effect of good performance rather than the cause. However, the results also reflect that a relatively better acquisition strategy for a firm to create value is by making many small acquisitions rather than a small number of large acquisitions, implying that acquisitions also drive performance. Overall, the evidence found is mixed and suggests that in the UK market, acquisition returns cannot be solely based on the market driven explanation. (JEL: G14, G34)
Keywords: mergers & acquisitions, price run-up, method of payment, frequent bidders, long-term wealth effects.
Fractal Measures in Market Microstructure Research
(Multinational Finance Journal, 2012, vol. 16, no. 1/2, pp. 1-18)
University of Lethbridge, Canada
This paper proposes the generalized use of fractional Brownian motion in a multifractal trading time framework to reveal variation in the index price diffusion process that appears before and after 'extreme' events of distinct origin. "Crashes" following internal self-organization and those caused by external shocks differ in the relaxation process. The goal of this paper is to test for differences in the price diffusion process related to the organization of trading. (JEL: C65, D53 D84, G01, G14)
Keywords: trading mechanics, multifractal spectrum, extreme events
Long Memory and Volatility Dynamics in the US Dollar Exchange Rate
(Multinational Finance Journal, 2012, vol. 16, no. 1/2, pp. ?-?)
Guglielmo Maria Caporale
Brunel University, UK
Luis A. Gil-Alana
University of Navarra, Spain
This paper focuses on nominal exchange rates, specifically the US dollar rate vis-à-vis the Euro and the Japanese Yen at a daily frequency. In the paper both absolute values of returns and squared returns are modelled using long-memory techniques, being particularly interested in volatility modelling and forecasting. Compared with previous studies using fractional integration such as Granger and Ding (1996), a more general model is estimated, which allows for dependence not only at the zero but also at other frequencies. The results show differences in the behaviour of the two series: a long-memory cyclical model and a standard I(1) model seem to be the most appropriate for the US dollar rate vis-à-vis the Euro and the Japanese Yen respectively. (JEL: C22, O40)
Keywords: Fractional integration, Long memory, Exchange rates, Volatility