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| Author: | Baker, M. Savasoglu, S. |
| Title: | Limited arbitrage in mergers and acquisitions |
| Journal: | Journal of Financial Economics
2002 : APR, VOL. 64:1, p. 91-115 |
| Index terms: | Mergers Financial structure Market efficiency Economic efficiency |
| Language: | eng |
| Abstract: | A diversified portfolio of risk arbitrage positions produces an abnormal return of 0.6-0.9% per month over the period from 1981 to 1996. The authors trace these profits to practical limits on risk arbitrage. In their model of risk arbitrage, arbitrageurs' risk-bearing capacity is constrained by deal completion risk and the size of the position they hold. Consistent with this model, the authors document that the returns to risk arbitrage increase is an ex ante measure of completion risk and target size. |
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