Garbatrage

Garbatrage

An increase in price and trading volume in a particular sector of the economy that results from a recent takeover creating a change in sentiment towards the sector. Also known as rumortrage.

Notes:

The term is usually used in reference to firms not directly related to the takeover. Speculators feel that the initial takeover is a precursor to more takeovers within the sector. Proponents of behavioral finance theory would view this psychological impact as evidence that supports their theory.

See also: Arbitrage, Behavioral Finance, Market, Public Company, Rumortrage, Sector, Speculator, Stock, Takeover

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Garbatrage

Rising stock prices and increased market activity in an entire sector caused by a psychology change stemming from a major takeover involving two companies in the sector. Speculators feel other takeovers are likely in the sector. See: Rumortrage.