Activist Arbitrage: A Study of Open-Ending Attempts of Closed-End Funds

Journal of Financial Economics, Vol. 95, No. 1, pp. 1-19, 2008

43 Pages Posted: 22 Oct 2011

See all articles by Michael Bradley

Michael Bradley

Duke University - Fuqua School of Business

Alon Brav

Duke University - Fuqua School of Business

Itay Goldstein

University of Pennsylvania - The Wharton School - Finance Department

Wei Jiang

Columbia Business School - Finance and Economics

Date Written: 2010

Abstract

This paper documents frequent attempts by activist arbitrageurs to open-end discounted closed-end funds, particularly after the 1992 proxy reform which reduced the costs of communication among shareholders. Open-ending attempts have a substantial effect on discounts, reducing them, on average, to half of their original level. The size of the discount is a major determinant of whether a fund gets attacked. Other important factors include the costs of communication among shareholders and the governance structure of the targeted fund. Our study contributes to the understanding of the actions undertaken by arbitrageurs in financial markets beyond just pure trading.

Suggested Citation

Bradley, Michael and Brav, Alon and Goldstein, Itay and Jiang, Wei, Activist Arbitrage: A Study of Open-Ending Attempts of Closed-End Funds (2010). Journal of Financial Economics, Vol. 95, No. 1, pp. 1-19, 2008 . Available at SSRN: https://ssrn.com/abstract=1947048

Michael Bradley

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-8006 (Phone)
919-660-7971 (Fax)

Alon Brav

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-2908 (Phone)
919-684-2818 (Fax)

Itay Goldstein

University of Pennsylvania - The Wharton School - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-746-0499 (Phone)

Wei Jiang (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States
(212) 854-5553 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
114
Abstract Views
850
rank
247,203
PlumX Metrics