Convertible bond arbitrage: Risk and return

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dc.contributor.author Hutchinson, Mark C.
dc.contributor.author Gallagher, Liam A.
dc.date.accessioned 2021-10-14T14:08:27Z
dc.date.available 2021-10-14T14:08:27Z
dc.date.issued 2010-02-01
dc.identifier.citation Hutchinson, M. C. and Gallagher, L. A. (2010) 'Convertible bond arbitrage: Risk and return', Journal of Business Finance and Accounting, 37(1/2), pp. 206-241. doi: 10.1111/j.1468-5957.2009.02178.x en
dc.identifier.volume 37 en
dc.identifier.issued 1/2 en
dc.identifier.startpage 206 en
dc.identifier.endpage 241 en
dc.identifier.issn 0306-686X
dc.identifier.uri http://hdl.handle.net/10468/12103
dc.identifier.doi 10.1111/j.1468-5957.2009.02178.x en
dc.description.abstract This paper specifies a simulated convertible bond arbitrage portfolio to characterise the risks in convertible bond arbitrage. For comparison the risk profile of convertible bond arbitrage hedge fund indices at both monthly and daily frequencies is also examined. Results indicate that convertible bond arbitrage is positively related to default and term structure risk factors. These risk factors are augmented with the simulated convertible bond arbitrage portfolio, mimicking a passive investment in convertible bond arbitrage, to assess the risk and return of individual hedge funds. We provide estimates of the performance of two hedge fund indices (an equally weighted and value weighted index) and a sample of convertible bond arbitrage hedge funds using a factor model methodology. Lagged and contemporaneous observations of the risk factors are specified, controlling for illiquidity in the securities held by funds. Our results cover two time periods. Initially we find evidence of abnormal risk adjusted returns in the individual hedge fund data and the equally weighted hedge fund index and no evidence of abnormal risk adjusted returns in the value weighted hedge fund index. When we examine performance during the credit crisis of 2007 and 2008 we find evidence of negative abnormal returns amongst individual hedge funds and the hedge fund indices. en
dc.format.mimetype application/pdf en
dc.language.iso en en
dc.publisher John Wiley & Sons, Inc. en
dc.rights © 2010, the Authors. This is the peer reviewed version of the following article: Hutchinson, M. C. and Gallagher, L. A. (2010) 'Convertible bond arbitrage: Risk and return', Journal of Business Finance and Accounting, 37(1/2), pp. 206-241, doi: 10.1111/j.1468-5957.2009.02178.x, which has been published in final form at: https://doi.org/10.1111/j.1468-5957.2009.02178.x This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. en
dc.subject Arbitrage en
dc.subject Convertible bonds en
dc.subject Trading en
dc.subject Hedge funds en
dc.subject Factor models en
dc.title Convertible bond arbitrage: Risk and return en
dc.type Article (peer-reviewed) en
dc.internal.authorcontactother Mark Hutchinson, Cork University Business School, University College Cork, Cork, Ireland. +353-21-490-3000 Email: m.hutchinson@ucc.ie en
dc.internal.availability Full text available en
dc.date.updated 2021-10-13T14:27:21Z
dc.description.version Accepted Version en
dc.internal.rssid 36797839
dc.contributor.funder Irish Research Council en
dc.contributor.funder Science Foundation Ireland en
dc.description.status Peer reviewed en
dc.identifier.journaltitle Journal of Business Finance and Accounting en
dc.internal.copyrightchecked Yes
dc.internal.licenseacceptance Yes en
dc.internal.IRISemailaddress m.hutchinson@ucc.ie en
dc.relation.project info:eu-repo/grantAgreement/SFI/SFI Principal Investigator Programme (PI)/07/MI/008/IE/Edgeworth Centre for Financial Mathematics/ en
dc.identifier.eissn 1468-5957


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