The Forecasting Ability of Investors' Attention : Evidence from M&As

The attention of investors (IA) has been at the centre of much debate and research in the last decades. We test the forecasting ability of the Google Search Volume Index (SVI), as proxy of and demand for information, in the context of M&As. We employ the Cox Proportional Hazard model to model the time to completion of the deals and investigate the determinants of success of M&As. We include the SVI in our analysis and find that a high IA clusters around deals with a higher probability of success. We attribute this result to the reduction of information asymmetry on specific deals that occurs when the demand for information and IA is high. Overall, our research contributes to the existing literature by providing evidence of the forecasting ability of IA around corporate events, as IA clusters around successful deals and it is irrelevant around unsuccessful deals