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The Stock Investment Strategy at Company Acquisition

Author

Listed:
  • Yu-Wei Lan

    (Takming University of Science and Technology)

  • Dan Lin

    (Takming University of Science and Technology)

  • Lu Lin

    (Takming University of Science and Technology)

Abstract

Recent studies in Accounting, Industrial Organizations and Finance often incorporate efficient market hypothesis in event studies. Event studies can be used to examine how changes in company environment affect corporate finance. However, using short-term stock prices to examine mean reversion may face a problem. Specifically, there is no evidence that changes in market values are unbiased estimates of changes in fundamentals. This study adopts program trading to test the mean reversion of an acquisition event (SPIL and ASE Group) between 2015 and 2016 in Taiwan. The results show that investors can use RSI spread and stock price deviation to make abnormal returns. In other words, investors can make profits based on technical analyses. Therefore, the evidence suggests that between 2015 and 2016, the security market in Taiwan did not fully meet the condition of a semi-strong form efficient market.

Suggested Citation

  • Yu-Wei Lan & Dan Lin & Lu Lin, 2016. "The Stock Investment Strategy at Company Acquisition," International Journal of Management Science and Business Administration, Inovatus Services Ltd., vol. 2(3), pages 24-32, February.
    • Handle: RePEc:mgs:ijmsba:v:2:y:2015:i:3:p:24-32
    DOI: 10.18775/ijmsba.1849-5664-5419.2014.23.1003
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    Cited by:

    1. Condorelli, Stefano, 2018. "Price momentum and the 1719-20 bubbles: A method to compare and interpret booms and crashes in asset markets," MPRA Paper 89888, University Library of Munich, Germany.

    More about this item

    Keywords

    Mean reversion; Program trading; Granger Casualty Test; Efficient market; Acquisition;
    All these keywords.

    JEL classification:

    • M00 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General - - - General

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