This thesis is concerned with acquisition activity in the UK and, specifically the prediction of takeovers. This is an important area for research for three reasons. Firstly, acquisition activity involves a small number of companies but creates very large sums of money. Secondly, acquisition activity can alter the composition of a company or an entire industry very rapidly making it a valuable tool for business. Lastly, there are many different topics within this field, allowing for a wealth of empirical analysis. A considerable amount of early research was limited to observation leaving some theories with little empirical backing. In addition, many earlier papers do not consider economic conditions. Recently the UK has experienced a boom and a recession. Both of these events may have effected acquisition activity and will be incorporated into this study. This thesis tackles several issues concerning acquisitions. Firstly, it deals with the level of acquisition activity and determines whether this behaviour is random or predictable. If it is predictable it should be possible to model this behaviour using appropriate indicators. The second issue is the prediction of takeovers identifying the companies likely to become involved in acquisitions. This study incorporates both accounting data and macro-economic factors. Finally, there is an analysis of acquisition benefits, considering the impact on share prices. The findings here suggest that the level of acquisition activity is predictable. However, in a boom it rises to an unprecedented level, demonstrating bubble-like properties. The empirical work concerning the prediction of acquisitions suggests that takeovers increase firm efficiency and remove poor managers. Furthermore, acquiring companies seek expansion and increased investment opportunities. Examining macro-economic conditions suggests funding and cash flow are important when acquiring in a boom, whilst productivity and market protection are vital in a recession. Finally, it appears that the target firm shareholders benefit irrespective of the outcome of the takeover.

Thesis advisor: Ryan Chahrour / This dissertation consists of three independent explorations of the interplay between expectations and macroeconomic activity. I investigate economic dynamics and policy issues concerning the management of expectations both from the lens of business cycles and medium-term fluctuations, embracing a rational expectations approach as well as venturing into the wilderness of bounded rationality. The first chapter, "Monetary Policy & Anchored Expectations - An Endogenous Gain Learning Model," investigates how a concern to anchor expectations affects the conduct of monetary policy. The chapter first proposes a novel model of expectations which provides a notion for unanchored expectations. In this model, expectations are the more unanchored the higher the sensitivity of long-run inflation expectations to short-run fluctuations. I then embed the expectations model in a general-equilibrium model of the business cycle, and estimate the extent of unanchoring using data on inflation expectations. Within the context of the thus calibrated model, I derive the Ramsey-optimal monetary policy. The main result is that it is optimal for a central bank to anchor inflation expectations to the inflation target. The way the central bank can achieve this is by responding very aggressively with its interest rate tool to fluctuations in long-run inflation expectations. The observation that motivates the second chapter, "Talking in Time - Dynamic Central Bank Communication," is that the management of expectations by the monetary authority is a dynamic problem in two ways. Firstly, in a dynamic economy, a central bank needs to decide when to communicate. Secondly, every time the central bank does talk to the public, it also has to choose what to talk about: the present or the future? The chapter thus extends existing macroeconomic research on various dimensions of optimal central bank communication by asking what the implications of dynamics are for the optimal information provision of the central bank to the public. To this end, I analyze a Bayesian Persuasion game between a central bank and the private sector in a static and a dynamic setting, in which the private sector tracks one economic variable, while the central bank wishes it to track a second variable instead. Importantly, the two problems are identical except for the correlation structure between the two variables, which is either cross-sectional or temporal. This way, I isolate the role of dynamics for the optimal communication policy. The main result is that in the dynamic setting, the prior beliefs of the private sector become endogenous to central bank communication and dampen the effectiveness of the central bank's communication. Therefore, the central bank faces a new tradeoff: it needs to push against priors in two ways. Relatively to the static solution, the central bank talks more about the economic variable it wants the private sector to learn about, and it also talks with less clarity in order to render the private sector's beliefs sufficiently responsive to its messages at each point in time. In the third chapter, "ICT-Specific Investment Shocks and Economic Fluctuations - Evidence and Theory of a General-Purpose Technology," joint with Marco Brianti, I explore empirically the role of information and communication technologies (ICT) for medium-run economic fluctuations. The first set of results demonstrate the hump-shaped dynamics of total factor productivity after an innovation in ICT, as identified in a structural vector autoregression context. I interpret the hump-shaped impulse response as a consequence of the slow diffusion of ICT technologies, and test this hypothesis using an estimated two-sector growth model. The second set of results document that, viewed through the lens of the model, the data favor the interpretation of innovations in the ICT-sector playing the role of a general-purpose technology. In other words, the slow buildup of the overall effect on productivity stems from the gradual diffusion of ICT in the economy. / Thesis (PhD) — Boston College, 2021. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

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<p>I study the link between capital markets and sources of macroeconomic risk. In chapter 1 I show that expected inflation risk is priced in the cross section of stock returns even after controlling for cash flow growth and volatility risks. Motivated by this evidence I study a long run risk model with a built-in inflation non-neutrality channel that allows me to decompose the real stochastic discount factor into news about current and expected cash flow growth, news about expected inflation and news about volatility. The model can successfully price a broad menu of assets and provides a setting for analyzing cross sectional variation in expected inflation risk premium. For industries like retail and durable goods inflation risk can account for nearly a third of the overall risk premium while the energy industry and a broad commodity index act like inflation hedges. Nominal bonds are exposed to expected inflation risk and have inflation premiums that increase with bond maturity. The price of expected inflation risk was very high during the 70's and 80's, but has come down a lot since being very close to zero over the past decade. On average, the expected inflation price of risk is negative, consistent with the view that periods of high inflation represent a "bad" state of the world and are associated with low economic growth and poor stock market performance. In chapter 2 I look at the way capital markets react to predetermined macroeconomic announcements. I document significantly higher excess returns on the US stock market on macro release dates as compared to days when no macroeconomic news hit the market. Almost the entire equity premium since 1997 is being realized on days when macroeconomic news are released. At high frequency, there is a pattern of returns increasing in the hours prior to the pre-determined announcement time, peaking around the time of the announcement and dropping thereafter.</p> / Dissertation

Thesis advisor: Robert G. Murphy / Thesis advisor: Fabio Schiantarelli / Thesis advisor: James Anderson / This dissertation consists of four essays. The first two essays investigate macroeconomic fluctuations and their sources. The third and fourth essays examine international capital mobility. / Thesis (PhD) — Boston College, 1994. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

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This thesis studies several issues in the field of macroeconomic and financial stability. In Chapter 2, I argue that systemic bankruptcy of firms can originate from coordination failure in an economy with investment complementarities. I demonstrate that in such an economy, a very small uncertainty about economic fundamentals can be magnified through the uncertainty about the investment decisions of other firms and can lead to coordination failure, which may be manifested as systemic bankruptcy. Moreover, my model reveals that systemic bankruptcy tends to arise when economic fundamentals are in the middle range where coordination matters. High financial leverage of firms greatly increases the severity of systemic bankruptcy. Optimistic beliefs of firms and banks can alleviate coordination failure, but can also increase the severity of systemic bankruptcy once it happens. Chapter 3 studies how coordination failure in a country's new technology investment dampens a country's economic growth. I establish a two-sector Overlapping Generation model where capital goods are produced by two different technologies. The first is a conventional technology with constant returns. The second is a new technology exhibiting increasing returns to scale due to technological externalities, about whose returns economic agents have only incomplete information. My model reveals that coordination failure in new technology investment can lead to slower economic growth. More interestingly, the model generates a positive correlation between economic growth and volatility. In Chapter 4, Frank Milne and I establish a dynamic currency attack model in the presence of a large player. In an attack on a fixed exchange rate regime with a gradually overvalued currency, both the inability of speculators to synchronize their attack and their incentive to time the collapse of the regime lead to the persistent overvaluation of the currency. We find that the presence of a large player can accelerate or delay the collapse of the regime, depending on his incentives to preempt other speculators or to ``ride the overvaluation." / Thesis (Ph.D, Economics) -- Queen's University, 2007-11-28 15:26:27.834

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