Leverage Buyout Return、Volatility and Order Imbalance
Date Issued
2009
Date
2009
Author(s)
Chang, Yao-Hsuan
Abstract
Leveraged buy-out has been a debated topic in finance since 1980’s, as a number of research on the return before and after LBO events. Many researches also find that there are insiders during LBO process. In this paper, we want to use order imbalances to capture some information asymmetric on the LBO events date. We want to examine the relations between order imbalances, volatility and stock returns. Then, we try to find the predictability. Finally, we develop a trading strategy and see if it can earn profits.ur empirical results show that the contemporaneous order imbalances have a significantly positive impact on current returns, and the lagged-one order imbalances also have a significantly positive impact on current returns disregarding the contemporaneous order imbalances. But when we condition on the contemporaneous imbalances, the impact of the lagged-one imbalances on returns turns to be negative. hen, we want to test if there is a small firm effect on our data. However, the relation is not significant, thus we can’t say the small firm effect exist from our test. In addition, we examine the relation between volatility and order imbalances by GARCH(1,1) model. The relation is not strong, suggesting that the market makers have good ability to control the price movement of LBO firms on the events date.inally, we develop a trading strategy and wish it can make profits. This strategy can earn positive profits but still cannot beat the original open-to-close returns.ey Words: Leveraged-buyout、Order Imbalance
Subjects
leveraged-buyout
Order Imbalance
Type
thesis
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