Merger arbitrageurs cash in on inefficient target stock pricing during M&A boom.
The study looked at how stocks of companies being targeted for buyouts are priced. They found that during busy times for mergers and acquisitions, the prices of these stocks don't always reflect all available information. Some stocks had wider price differences than expected, leading to higher profits for investors who bet on these deals. This suggests that the market for these buyouts isn't always efficient, allowing some investors to make more money than expected.