Characteristics of Risk and Return in Risk Arbitrage Export

@article{citeulike:201501, abstract = {This paper analyzes 4,750 mergers from 1963 to 1998 to characterize the risk and return in risk arbitrage. Results indicate that risk arbitrage returns are positively correlated with market returns in severely depreciating markets but uncorrelated with market returns in flat and appreciating markets. This suggests that returns to risk arbitrage are similar to those obtained from selling uncovered index put options. Using a contingent claims analysis that controls for the nonlinear relationship with market returns, and after controlling for transaction costs, we find that risk arbitrage generates excess returns of four percent per year.}, author = {Mitchell, Mark and Pulvino, Todd}, citeulike-article-id = {201501}, citeulike-linkout-0 = {http://www.jstor.org/stable/2697819}, journal = {The Journal of Finance}, keywords = {applications, finance}, number = {6}, pages = {2135--2175}, posted-at = {2005-05-16 12:31:55}, priority = {3}, title = {Characteristics of Risk and Return in Risk Arbitrage}, url = {http://www.jstor.org/stable/2697819}, volume = {56}, year = {2001} }

TY - JOUR ID - citeulike:201501 L3 - citeulike-article-id:201501 N2 - This paper analyzes 4,750 mergers from 1963 to 1998 to characterize the risk and return in risk arbitrage. Results indicate that risk arbitrage returns are positively correlated with market returns in severely depreciating markets but uncorrelated with market returns in flat and appreciating markets. This suggests that returns to risk arbitrage are similar to those obtained from selling uncovered index put options. Using a contingent claims analysis that controls for the nonlinear relationship with market returns, and after controlling for transaction costs, we find that risk arbitrage generates excess returns of four percent per year. IS - 6 JF - The Journal of Finance EP - 2175 TI - Characteristics of Risk and Return in Risk Arbitrage VL - 56 SP - 2135 KW - applications KW - finance AU - Mitchell, Mark AU - Pulvino, Todd PY - 2001/// UR - http://www.jstor.org/stable/2697819 ER -