Institutional Trading Around M&A Announcements
61 Pages Posted: 20 Dec 2018 Last revised: 8 Aug 2023
Date Written: August 7, 2023
Abstract
We contrast the investment strategies of hedge funds and mutual funds around M&A transactions. We find that hedge funds increase their holdings of soon-to-be takeover targets by 7.5% during the quarter before M&A announcements. Conversely, mutual funds reduce their equity holdings in impending targets by 3.0% over the same time period. These results, which withstand several robustness tests, suggest that hedge funds enjoy superior access to private information or possess better skills to process public information than mutual funds.
Keywords: M&A, Mutual Funds, Hedge Funds, Performance
JEL Classification: G14, G23, G24, G34
Suggested Citation: Suggested Citation