Competition Scale and Hedge Fund Performance: Evidence from Merger Arbitrage
15 Pages Posted: 15 Oct 2019
Date Written: May 2019
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: 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
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