Characteristics of risk and return in risk arbitrage¶
Mitchell, M., & Pulvino, T. (1998). Characteristics of risk and return in risk arbitrage. Journal of Finance, 56(6), 2135-2175.
Cited by¶
1 citation across 1 artifact.
Primes¶
- Arbitrage (Finance)
- Mitchell and Pulvino (2001), studying 4,750 mergers over 1963–1998, show that risk-arbitrage returns exhibit a piecewise-linear payoff resembling a written index put: positive flat returns in calm markets but sharply correlated with market declines during crises, demonstrating that the spread compensates arbitrageurs for bearing deal-failure risk concentrated in market downturns.
Supported in partVerified against the publisher's abstract
The paper's own abstract confirms the 4,750 mergers (1963-1998) and the written-index-put payoff shape, but not the deal-failure-risk explanation.
“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.”
- Mitchell and Pulvino (2001), studying 4,750 mergers over 1963–1998, show that risk-arbitrage returns exhibit a piecewise-linear payoff resembling a written index put: positive flat returns in calm markets but sharply correlated with market declines during crises, demonstrating that the spread compensates arbitrageurs for bearing deal-failure risk concentrated in market downturns.
Verification¶
Does it exist? Confirmed. This work's DOI resolves to a registered record, which fixes its identity. That is all it fixes.
Does it back the claim? Read against the text for 1 of 1 citation: 1 supported in part. Each verdict is shown under its citation below, with what in the work backs the sentence.
Support is checked per citation rather than per work — the same source can be cited soundly in one article and wrongly in another. Per-citation recording began recently, so a citation with no recorded check is a gap in the record rather than evidence it went unchecked.
See how references were verified.
Registry ID ref:70388a52e4f0 · see in the full table