Risk arbitrage : profitability, characteristics and opportunities

Thorne, Matthew. (2008). Risk arbitrage : profitability, characteristics and opportunities Honours Thesis, School of Business, University of Queensland.

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Author Thorne, Matthew.
Thesis Title Risk arbitrage : profitability, characteristics and opportunities
School, Centre or Institute School of Business
Institution University of Queensland
Publication date 2008-01-01
Thesis type Honours Thesis
Total pages 194
Language eng
Subjects 14 Economics
Formatted abstract
This thesis undertakes an empirical investigation into several aspects of the hedge fund strategy known as risk arbitrage from a comprehensive sample of the Australian market for corporate control with a primary focus on implementing an appropriate benchmarking technique. Risk arbitrage portfolios formed on the calendar-time approach provide the foundation of the analysis, which estimates that significant abnormal returns, both statistically and economically, are consistently produced by the strategy. Subsequently, an analysis of the risk-return characteristics of the portfolios indicates that there is a non-linear relationship between risk arbitrage returns and market returns. This non-linearity is particularly dependent upon the particular strategy implemented by each portfolio. Further, the characteristics of cash and scrip deals are examined to ascertain whether the risks of each payment method are different depending on broader market conditions. Finally, this thesis investigates the explanatory and predictive power of the arbitrage spread and the volatility of this spread in relation to the probability of a proposed merger or acquisition being successfully consummated.

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Created: Thu, 25 Nov 2010, 00:52:27 EST by Ning Jing on behalf of The University of Queensland Library