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Competition, scale and hedge fund performance: Evidence from merger arbitrage

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  • Rzakhanov, Zaur
  • Jetley, Gaurav

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.

Suggested Citation

  • Rzakhanov, Zaur & Jetley, Gaurav, 2019. "Competition, scale and hedge fund performance: Evidence from merger arbitrage," Journal of Economics and Business, Elsevier, vol. 105(C).
    • Handle: RePEc:eee:jebusi:v:105:y:2019:i:c:s0148619518301280
    DOI: 10.1016/j.jeconbus.2019.04.002
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    References listed on IDEAS

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    Cited by:

    1. Yang, Fan & Havranek, Tomas & Irsova, Zuzana & Novak, Jiri, 2022. "Hedge Fund Performance: A Quantitative Survey," EconStor Preprints 260612, ZBW - Leibniz Information Centre for Economics.
    2. Yang, Fan & Havranek, Tomas & Irsova, Zuzana & Novak, Jiri, 2024. "Where Have All the Alphas Gone? A Meta-Analysis of Hedge Fund Performance," EconStor Preprints 289497, ZBW - Leibniz Information Centre for Economics.
    3. Kooli, Maher & Zhang, Min, 2022. "Not only skill but also scale: Evidence from the hedge funds industry," International Review of Financial Analysis, Elsevier, vol. 83(C).

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    More about this item

    Keywords

    Financial institutions; Hedge funds; Performance evaluation; Merger arbitrage; Diseconomies of scale;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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