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Merger Waves and the Structure of Merger and Acquisition Time-Series

R. J. Town
Journal of Applied Econometrics
Vol. 7, Supplement: Special Issue on Nonlinear Dynamics and Econometrics (Dec., 1992), pp. S83-S100
Published by: Wiley
Stable URL: http://www.jstor.org/stable/2284985
Page Count: 18
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Merger Waves and the Structure of Merger and Acquisition Time-Series
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Abstract

What is the best characterization of mergers and acquisitions time-series? The traditional response is that mergers occur in `waves'. I estimate a two-state, Markov switching-regime model which should capture wave structure if it is present in the data. Linear and nonlinear diagnostics tests suggest that the switching regime model fits the data well, and better than ARIMA models. Said differently, the underlying pattern in the M&A data can be characterized by dichotomous shifts between high and low levels of activity. In addition, objective inferences about the precise dates for these waves are available through a nonlinear filter.

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