Synchronized Arbitrage and the Value of Public AnnouncementsVW Staff
Roy Zuckerman: Synchronized Arbitrage and the Value of Public Announcements
July 22, 2012
Hedge fund managers frequently announce positions they are taking in stocks, whether short or long, and offer a public rationale for their actions. Why do they do this? In this paper, I empirically investigate one prominent explanation for these announcements, namely that they serve as a public synchronizing signal for arbitrageurs.
Abreu and Brunnermeier (2002) discuss this notion of synchronized arbitrage. They hypothesize that a single arbitrageur is incapable or unwilling to correct a large mispricing, and that a coordinated action by a critical proportion of arbitrageurs . . .
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