If the analysis is incorrect, the strategy may cost money. The stock price of a target company typically rises when an acquisition is announced. A skilled analyst team at an institutional investor will judge whether or not the acquisition is likely to occur, based on a host of factors, such as price, regulatory environment, and fit between the services or products offered by both companies.
If the acquisition does not happen, the price of the stock may suffer. The analyst team will then decide the likely landing place of the stock price if the acquisition does happen, based on a careful analysis of the target and acquiring companies. If there is enough potential for upside, the investor may buy shares of the target company to sell after the corporate action is complete and the target company's stock price adjusts.
Hedge Funds. Investing Essentials. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money.
Why An Event-Driven Backtester?
Personal Finance. Your Practice. Popular Courses. What is an Event-Driven Strategy? Key Takeaways An event-driven strategy refers to an investment strategy in which an institutional investor attempts to profit from a stock mispricing that may occur during or after a corporate event.
Generally investors have teams of specialists who analyze corporate actions from multiple perspectives, before recommending action. Examples of corporate events include mergers and acquisitions, regulatory changes, and earnings calls. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Related Terms Asteroid Event An asteroid event is a sudden, unexpected incident that has serious consequences for a business. Corporate Action Definition A corporate action is any event, usually approved by the firm's board of directors, that brings material change to a company and affects its stakeholders.
Merger Arbitrage Explained Merger arbitrage is the purchase and sale of the stocks of two merging companies at the same time with the goal of creating "riskless" profits. It has been observed that the 16th day of the month is the most profitable day in a month, which leads to a trading strategy.
In the section, you will learn the reason behind this effect, backtest the payday effect strategy and analyse the performance of the strategy. Payday Effect. Reason for Payday Drift. Rules for Payday Effect Strategy.
Event-Driven Strategy
Payday Effect Code. Find 16th Day of the Month. Payday Effect Additional Reading. Federal Open Market Committee Meetings occur eight times per year and dates are well-known. There is some positive drift in the stock prices during these meetings.
In the section, you will learn the reason behind this and create a trading strategy around that. FED Day Effect.
Options Expiration Effect in Equities. During options expiration week, there is some unusual pattern observed in the equity markets, which leads to another calendar anomaly strategy. You will learn the reason behind this effect and create a trading strategy based on this effect. Options Expiration Effect.
Trading Rules for Options Expiration Strategy. Options Expiration Week Market Drift. Equity Segment in Options Expiration. Options Expiration Effect Code. Options Expiration Effect Additional Reading.
Latest commit
Auction Trading Effect in Fixed Income. Treasury prices fall for a brief period of time right before the dates of treasury bond auctions by governments. In this section, you will learn how to use this fall in price to create a profitable seasonal trading strategy. You will also be implementing it in Python. Fixed Income Government Bonds.
Event Driven Trading Strategies – An Unorthodox Approach
Government Bond Risk. Government Bonds Trading.
- quotes for stock options.
- USA1 - Event-driven financial trading method and system - Google Patents.
- US20120330812A1 - Event-driven financial trading method and system - Google Patents.
- Event-Driven Trader!
- Event Driven Trading Strategies.
- Selected media actions.
Auction Trading Effect. Definition of Treasury Auction. Treasury Bond Price Patterns. Market Drift During Treasury Auction. Auction Trading Effect Code. Implementation of Treasury Auction Conditions. Auction Effect Additional Reading. End of the Month Effect in Fixed Income. Fixed income bonds like the government bonds show statistically significant positive returns at the end of the month. This is seen particularly in bonds with longer maturity periods.
This is just like in effect in equities handled in the sections before. In this section, you learn to use fixed-income ETFs to create month-end strategies to exploit this effect. End of the Month Effect. End of the Month. Condition for Last Day of the Month. End of Month Effect Additional Reading. Calendar Effect in Volatility Market. VIX index is a measure of perceived volatility in the market. VIX futures are traded in the market and they expire every month.
We see a seasonal pattern of returns around the time of expiration which is statistically significant.
You will also learn ways to enhance this strategy.