Google attention and target price run ups

We explore the increase in the share prices of target firms before their merger announcements. We use a novelty Google search volume to proxy the market expectation hypothesis according to which firms with an abnormal upward change in Google searches are identified as firms with potential merger activity. We find that Google indicators can explain a larger percentage of the price increase in target firms before their mergers than the Financial Times. However even the Google proxy of the market expectation hypothesis can only explain at best 36% of the target price run ups.

► We proxy the market expectation hypothesis when using the Google volume search. ► Google can explain a larger percentage of the target price run ups than FT. ► Google can only explain at best 36% of the target price run ups. ► Remaining price pattern could be attributed to private information. ► Those findings are of interest to regulators such as the UK Takeover Panel.