We find that bidder-target stock return correlations positively predict merger synergies, and the predictive power is enhanced when we focus more on idiosyncratic correlations. A measure of idiosyncratic correlation (IDC) between bidder and target firms that controls for all other stocks,...

Among U.S. public firms, technological innovation is concentrated in a small set of large players, with innovation “leaders” having considerably lower systematic risk than “laggards.” To understand this fact, we build a winner-takes-all patent-race model and show that a firm's expected...