Simultaneous Analyst Coverage and the Reduction of the Risk-Arb Spread

24 Pages Posted: 24 Mar 2019

See all articles by Md Miran Hossain

Md Miran Hossain

Florida Atlantic University

Benjamin Jansen

Middle Tennessee State University - Department of Economics and Finance

Jon Taylor

Florida Atlantic University - Finance

Date Written: March 9, 2019

Abstract

Research on mergers and hedge funds find that the risk arbitrage spread has contracted. This paper investigates the role financial analysts have on risk arbitrage by comparing mergers where a single analyst covers both the target and the acquirer prior to the deal announcement. We find that simultaneous coverage increases as a percent of M&A deals and that deals with simultaneous analyst coverage have a lower risk-arb spread. We additionally find that these deals have a lower takeover premium and longer time to completion. Overall, results suggest that simultaneous analyst coverage has reduced the risk-arb spread.

Keywords: analysts, risk arbitrage, mergers, market efficiency, hedge funds

JEL Classification: G10, G14, G34, M41

Suggested Citation

Hossain, Md Miran and Jansen, Benjamin and Taylor, Jon, Simultaneous Analyst Coverage and the Reduction of the Risk-Arb Spread (March 9, 2019). Available at SSRN: https://ssrn.com/abstract=3349823 or http://dx.doi.org/10.2139/ssrn.3349823

Md Miran Hossain

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

Benjamin Jansen

Middle Tennessee State University - Department of Economics and Finance ( email )

Murfreesboro, TN 37132
United States

Jon Taylor (Contact Author)

Florida Atlantic University - Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

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