TY - JOUR
T1 - Possible explanations of no-synergy mergers and small firm effect by the Generalized Capital Asset Pricing Model
AU - Levy, Haim
PY - 1991/1
Y1 - 1991/1
N2 - The Sharpe-Lintner Capital Asset Pricing Model (CAPM) and the General Capital Asset Pricing Model (GCAPM) suggested by Levy (1978), Merton (1987), and Markowitz (1989) are compared and analyzed. Under the GCAPM we obtain the following main results: 1) the value additivity principle breaks down, which explains mergers and acquisitions; 2) beyond a certain limit, the profit from additional merger is negative; and 3) in a GCAPM equilibrium, small firms earn an abnormal profit in comparison to what is predicted by the CAPM. These results, which are indeed observed in the market, are fully consistent with the GCAPM, but are in contradiction to the CAPM.
AB - The Sharpe-Lintner Capital Asset Pricing Model (CAPM) and the General Capital Asset Pricing Model (GCAPM) suggested by Levy (1978), Merton (1987), and Markowitz (1989) are compared and analyzed. Under the GCAPM we obtain the following main results: 1) the value additivity principle breaks down, which explains mergers and acquisitions; 2) beyond a certain limit, the profit from additional merger is negative; and 3) in a GCAPM equilibrium, small firms earn an abnormal profit in comparison to what is predicted by the CAPM. These results, which are indeed observed in the market, are fully consistent with the GCAPM, but are in contradiction to the CAPM.
KW - Capital Asset Pricing Model
KW - General Capital Asset Pricing Model
UR - http://www.scopus.com/inward/record.url?scp=34249918360&partnerID=8YFLogxK
U2 - 10.1007/BF02408409
DO - 10.1007/BF02408409
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AN - SCOPUS:34249918360
SN - 0924-865X
VL - 1
SP - 101
EP - 127
JO - Review of Quantitative Finance and Accounting
JF - Review of Quantitative Finance and Accounting
IS - 1
ER -