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The long and the short of convertible arbitrage: An empirical examination of arbitrageurs’ holding periods

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  • Marle, Mats van
  • Verwijmeren, Patrick

Abstract

We find that the average holding period of newly issued convertible bonds by convertible arbitrage hedge funds is approximately 11.6 months, which on average represents only 14% of the bonds’ time to maturity. The relatively short holding periods highlight that hedge funds’ motivations for holding convertible bonds are distinct from firms’ traditional reasons for issuing them. The short holding periods are in line with convertible arbitrage hedge funds making convertible issues a low cost financing alternative for firms. We show that both issue and hedge fund characteristics affect holding periods.

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  • Marle, Mats van & Verwijmeren, Patrick, 2017. "The long and the short of convertible arbitrage: An empirical examination of arbitrageurs’ holding periods," Journal of Empirical Finance, Elsevier, vol. 44(C), pages 237-249.
    • Handle: RePEc:eee:empfin:v:44:y:2017:i:c:p:237-249
    DOI: 10.1016/j.jempfin.2017.09.001
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    References listed on IDEAS

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    Cited by:

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    3. Liao, Yulu & Huang, Paoyu & Ni, Yensen, 2022. "Convertible bond issuance volume, capital structure, and firm value," The North American Journal of Economics and Finance, Elsevier, vol. 60(C).
    4. Liang‐Chih Liu & Tian‐Shyr Dai & Lei Zhou & Hao‐Han Chang, 2022. "Analyzing interactive call, default, and conversion policies for corporate bonds," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(8), pages 1597-1638, August.

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    More about this item

    Keywords

    Convertible arbitrage; Hedge funds; Security holdings;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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