TITLE:
Dynamic Arbitrageurs’ Long-Run Impacts on Convertible Bond Issuers’ Stock Prices
AUTHORS:
Serhat Yildiz
KEYWORDS:
Convertible Bond, Stock Prices
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.9,
June
12,
2018
ABSTRACT: I examine convertible bond arbitrageurs’
long-run impact on convertible bond issuers’ stock prices. I find a negative
relation between arbitrage activity around convertible bond issues and
convertible bond issuers’ long-run stock returns. Average three-year holding
period return of convertible bond issuers with no-arbitrage activity around
their convertible bond issues is two times larger than that of convertible bond
issuers with arbitrage activity around their convertible bond issues. Overall,
I show that convertible bond arbitrageurs’ price impact is not limited to
short-term [1], but it also has a long-term component.