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Contribution Details
| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Assessing the Connection Between News Sentiments of Mergers and Acquisition Announcements and Stock Returns |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 41 |
| Date | 2021 |
| Abstract Text | In the thesis, I test the power of several variables to explain and predict returns on the stock of the company, targeted in an M&A deal over 30 days after the announcement of the deal. Some independent variables such as size, momentum, value, and liquidity represent classical characteristics found by academics to explain stock returns. Independent variables, including company-specific sentiments, market-level sentiments, news coverage of the company, and sentiments contained in a piece of specific news, are based on results of research papers, analysing effects of news sentiments on stock returns. I conclude that on the analysed period from 2008 to 2016, only news coverage and shares trading volume of the target company before the deal announcement and the deal type are statistically significant for explaining returns to target shareholders over 30 days after the announcement. Based on these results, I construct an investment strategy, which achieves mean returns of 21% per annum out of sample on the period from 2017 to 2021 and outperforms market returns of 15%, represented by the S&P 1500 Index and Merger Arbitrage strategy returns of 7%, represented by the HFRI 500 Merger Arbitrage Index. From 2017 to 2021, the Sharpe Ratio of constructed investment strategy amounts to 2.53. |
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