Statistical Evidence of the Endogeneity Problem: Predicting the Outcome of Tender Offers

In the paper “Predicting the Outcome of Tender Offers: An Endogeneity Problem”, we argue that previous econometric models designed to predict the outcome of tender offers have been estimated incorrectly. We illustrate that the source of the estimation error comes from variables which are posited to explain the outcome of tender offers and treated as exogenous when in fact they are endogenous. We discuss the possibility, using the Nelson‐Olson simultaneous equation model, to solve the endogeneity problem. Although correct at the theoretical level we did not actually estimate the model using the Nelson‐ Olson technique. The complexity of applying the Nelson‐ Olson technique motivated us to search for an alternative solution to the endogeneity problem.