Competition Scale and Hedge Fund Performance: Evidence from Merger Arbitrage

15 Pages Posted: 15 Oct 2019

See all articles by Zaur Rzakhanov

Zaur Rzakhanov

University of Massachusetts Boston - Department of Accounting and Finance

Gaurav Jetley

Analysis Group, Inc. - New York City Office 151 West 42 Street 23rd Floor New York, NY 10036 United States

Date Written: May 2019

Abstract

The study explores the impact of sector and individual fund’s size on performance. We demonstrate that alpha is related to demand for arbitrage capital as much as to its supply. Sector size affects alpha via price impact channel: larger scale depresses merger arbitrage spreads, thus lowering alpha. While we find that fund size has no impact on alpha, managerial skill has an economically significant impact of funds’ performance.

Keywords: Financial institutions, Hedge funds, Performance evaluation, Merger arbitrage, Diseconomies of scale

JEL Classification: G11, G23

Suggested Citation

Rzakhanov, Zaur and Jetley, Gaurav, Competition Scale and Hedge Fund Performance: Evidence from Merger Arbitrage (May 2019). Journal of Economics and Business, No. 105, 2019, Available at SSRN: https://ssrn.com/abstract=3463733

Zaur Rzakhanov (Contact Author)

University of Massachusetts Boston - Department of Accounting and Finance ( email )

Boston, MA 02125
United States

Gaurav Jetley

Analysis Group, Inc. - New York City Office 151 West 42 Street 23rd Floor New York, NY 10036 United States ( email )

151 west 42 street
New York, NY
United States

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