The scientific article written by Patrick Verwijmeren, professor of Corporate Finance at Erasmus School of Economics, in collaboration with Mats van Marle, student at Erasmus School of Economics, will be published in the Journal of Empirical Finance in December 2017.
In the article, titled ‘The Long and Short of Convertible Arbitrage’, Verwijmeren and Van Marle find that the average holding period of newly issued convertible bonds by convertible arbitrage hedge funds is approximately 11.6 months, which on average represents only 14% of the bonds’ time to maturity. The relatively short holding periods highlight that hedge funds’ motivations for holding convertible bonds are distinct from firms’ traditional reasons for issuing them. The short holding periods are in line with convertible arbitrage hedge funds making convertible issues a low cost financing alternative for firms. Their research shows that both issue and hedge fund characteristics affect holding periods.