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,...

We show that merger announcement returns account for virtually all of the measured size premium. An empirical proxy for ex ante takeover exposure positively and robustly relates to cross-sectional expected returns. The relation between size and expected returns becomes positive or insignificant,...