A term combining the words "rumor" and arbitrage, used to describe trading that occurs on the basis of rumors of a takeover.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
An increase in the price of a security when another company in the same or a similar sector is acquired by a third company. For example, if Holding Company A buys Mining Corporation B, garbatrage occurs when the share price for Mining Corporation C goes up. Garbatrage occurs when speculation surrounds the initial acquisition and rumors abound that more takeovers are likely. It is also called rumortrage and is an example of behavioral economics. See also: Arbitrage.
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