A study on pairing arbitrage strategy of stock passive structured fund in China under extreme market conditions

Liang Wang, Xianyan Xiong and Tingjia Xu

Finance Research Letters, 2021, vol. 40, issue C

Abstract: Considering the factors such as arbitrage lag, transaction cost and overall discount or premium, this paper constructs the split and merger arbitrage models to investigate the pairing arbitrage strategy of stock passive structured fund in China under extreme market conditions. The empirical results mainly show that: (i) the actual success times of merger arbitrage is significantly higher than that of split arbitrage, indicating that the former is more likely to succeed than the latter. (ii) the actual yield of split arbitrage is higher than that of merger arbitrage, and the former is far more at risk than the latter.

Keywords: Structured fund; Arbitrage; Extreme market (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320301720

DOI: 10.1016/j.frl.2020.101721

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