This paper examines the effect of acquirer likelihood on future stock returns.In sharp contrast to prior findings, acquirer likelihood is a strong and negative predictor of cross-sectional future returns after controlling for target likelihood.If takeover USE OF AUTHENTIC FILMS WITH SUBTITLES IN THE PROCESS OF LEARNING NEW VOCABULARY IN HIGHER EDUCATION SECTOR (AS BASED ON THE ENGLISH LANGUAGE MATERIAL) exposure represents a risk premium, the effect on stock valuation should only present in either likelihood measure (acquirer or target likelihood).
This evidence casts doubt on the rational Sundowner Winds at Montecito during the Sundowner Winds Experiment risk explanation, but is consistent with a relative mispricing story.Investors take positions accordingly to explore profits from takeovers.Profits from trading strategy based on takeover probability are concentrated in stocks with high misvaluation characteristics, including small size, value, high momentum, high investment, and low turnover firms, as well as both high and low issuance (or accrual) firms.