Lecture: Convertible Bond Arbitrageurs as Suppliers of Capital
Professor Mila Getmansky Sherman of the Isenberg School of Management will be presenting at this week's Finance Seminar. All are invited to attend.
The topic of the seminar is "Convertible Bond Arbitrageurs as Suppliers of Capital."
Abstract: This paper examines the potential role of convertible bond arbitrageurs as suppliers of capital to issuers. We link the time series of aggregate convertible bond issuance to measures of capital supply: convertible bond arbitrage hedge fund flows, returns, and a proxy for arbitrageurs' use of leverage. We find that issuance is positively and significantly related to increases in all three of these measures. In order to interpret this finding, we employ an identification strategy that uses price-quantity pairs to distinguish changes in supply that are due to shifts in convertible bond market supply conditions versus demand conditions. Using fund flows into convertible bond arbitrage hedge funds as a supply proxy, we find significant sensitivity of issuance to both supply- and demand-driven flows; however, variation in demand conditions appears to be most important.
More information about Professor Mila Getmansky Sherman.
