| Summary: | 碩士 === 國立臺灣大學 === 財務金融學研究所 === 95 === This paper is intended to be an investigation of the characteristics of returns and risks in merger arbitrage in Taiwan and compares results with results from the United States and Australia. We analyze 29 mergers including successful and failed deals which were announced between 2000 and 2006. In addition to typical investments, we introduce a dynamic arbitrage strategy which adjusts positions in the portfolio depending on the movements of the arbitrage spread in each deal. The analyses reported are based on monthly merger arbitrage returns. Monthly returns are compounded daily which is then calculated for every active deal within the month. We benchmark arbitrage portfolio returns with the linear CAPM model, Fama and French (1993) three factor model, and the piecewise linear model.
The following results are obtained: first, merger arbitrage returns can not generate abnormal return whether in a typical investment or dynamic strategy, second, the static arbitrage returns is a insignificantly correlated with market returns, while there are weak negative correlation between dynamic arbitrage returns and market index returns using CAPM market model. Third, in contrast to the United States, we have the same result with Australia that correlations between arbitrage portfolio returns and market returns are the same regardless of different market returns.
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