Event Driven Investment Strategy Based On Significant Campany Events

In this paper, we have studied 148 company events samples between 2013 and 2014 and found that event-driven investment strategy based on significant company events can obtain a positive average excess return. And the annualized average excess return rate is 15.9691% with 37%(-5%,+6%) probabilities this return rate been negative. At the same time, according to the type of company events, we also studied 97 events samples labeled as horizontal integration and 29 events labeled as vertical integration. We found that these two type of events can also obtain a positive average excess return, their annualized average excess return rates are 12.576% and 44.676%, also with 37%(-7%,+8%) and 26%(-10%,+18%) probabilities their return rate been negative.In addition, we further analyzes the factors that impact of these excess returns. We established a CAPM model regarding macro and micro indicators, with the macro indicators containing monetary cycle index and stock market cycle index and micro indicators containing total share capital and 52 weeks' average turnover rate. After regression, we found that interest rate at hike cycle has a positive impact on excess return and stock market in a downward cycle has a significant positive impact on excess returns. Besides 52 weeks average turnover rate also has a significant positive impact on the excess return. Which means the more active stock trading, the higher the excess return.At last, we tracked the daily average cumulative excess return rate performance of each sample during the holding period and successfully work out a holding strategy to optimize average excess return and reduce risk. The best holding period for overall samples is between 94-110 days, with the annualized average excess return went up to 21.5%-23.75%, and the risk control at 35%(0,+ 6%); The best holding period for horizontal integration events samples is between 104-113 days, with the annualized average excess return went up to 15%-17.5%, and the risk been controlled less than 38%; The best holding period for vertical integration events samples is between 1-7 days, with the annualized average excess return went up to 300%-900 %, and risk controlled at 24%( 0,+ 17%).