Selected essays in empirical asset pricing

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Research in empirical asset pricing has gained prominence over the last three decades, driven by the availability of new databases. This field contributes to the ongoing debate between neoclassical and behavioral explanations of asset pricing, enhancing our understanding of price evolution in capital markets. It requires a solid grasp of capital markets, trading processes, asset pricing models, proficiency in managing large datasets, and strong programming skills. Christian Funke's doctoral thesis comprises three significant essays in this area. The first essay examines the long-term performance of rival companies related to acquisition targets, revealing that capital markets underreact to information in M&A announcements. Funke finds a return drift lasting up to 12 months post-announcement, influenced by both positive and negative competitive effects. The second essay highlights a notable drift in long-term industry returns following M&A announcements. Industries with positive average reactions tend to perform well in the future, while those with negative reactions continue to struggle. This evidence indicates that capital markets underreact to the broader industry information conveyed by merger announcements, underscoring the complexities of asset pricing dynamics.