Empirical Verification of the Anchoring Effect Hypothesis on the Acquiring Company’s Stock Returns in Trading Deals

Currently, theoretical and practical research pays much attention to merger and acquisition deals, but it is of great importance to study behavior factor and irrational behavior buying company too. The anchoring effect enables estimating this type of deviations on the quantitative level. The relevance of the study is provided by the necessity to take into account investor cognitive bias to explain logic and to evaluate efficiency of the national stock market. Academic novelty is an empirical verification of the hypothesis applied to Russian capital market with the use of quantitative methods. The aim of the paper is to test the hypothesis concerning the influence of anchoring effect on acquiring company’s stock returns on Russian M&A market and to perform quantitative estimation of the strength of this influence by regression modeling. The outcome of the study is the practical recommendations on taking into account the behavior bias designed for investors. The research was carried out on the basis of data on domestic acquiring companies by means of correlation and regression analysis. The methodology comprised modeling of expected and abnormal stock returns relative to merger and acquisition deals date announcement to reveal statistically significant relationship. The study empirically proves a significant anchoring effect on quotation dynamics. The regression equations have been obtained, statistical significance of factors has been determined that is a quantitative measure of the given behavior bias on Russian market. The obtained results concord with the results of the studies performed for foreign stock markets, proving universality of the effect. Practical value of the research is the possibility to implement this approach for comparative analysis of efficiency of various capital markets and for development of investment strategies addressing the consequences of behavior prejudice.

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