The Profitability and Effectiveness of Merger Arbitrage: Evidence from IBM & Red Hat

DOI

10.2991/978-94-6463-042-8_45How to use a DOI?

Keywords

Merger Arbitrage; Risk Arbitrage; profitability; Event Study

Abstract

Contemporarily, it remains an unresolved issue whether the merger arbitrage strategy, as one of the hedge fund strategies, is really profitable for investors in today’s semi-strong and efficient market. In this paper, the profitability and effectiveness of this strategy are evaluated based on an event study in terms of data analysis with the case of IBM's acquisition of Red Hat in 2018. According to the results, it is discovered that the merger will have a more positive effect on Red Hat than IBM in the short term. These results shed light on instructing junior merger arbitrage researchers and pave a path for further investigation of such a kind of strategy.

Copyright

© 2023 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Xin Xie
PY  - 2022
DA  - 2022/12/29
TI  - The Profitability and Effectiveness of Merger Arbitrage: Evidence from IBM & Red Hat
BT  - Proceedings of the 2022 International Conference on mathematical statistics and economic analysis (MSEA 2022)
PB  - Atlantis Press
SP  - 308
EP  - 313
SN  - 2352-538X
UR  - https://doi.org/10.2991/978-94-6463-042-8_45
DO  - 10.2991/978-94-6463-042-8_45
ID  - Xie2022
ER  -