How Fast Can the Market Get It? Evidence from Alliance Synergies

We study how financial markets evaluate the synergies generated by alliances. Using the complete set of international alliances over the period 2002-2009, we find that fund managers choose to trade alliance stocks have superior information. Strategies based on fund rebalancing may deliver performance as high as 28% in the year after the alliance announcement. This profitability also increases in information proximity. The ability for the market to price synergies or learn from the trading of sophisticated investors, however, is rather limited.