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An event-driven investment strategy is a hedge fund investment approach that seeks to exploit pricing inefficiencies caused by corporate events such as mergers, acquisitions, restructurings, bankruptcies, and other significant events. This investment strategy can offer substantial returns by identifying and capitalizing on these events before the broader market fully reacts to them. In this comprehensive guide, we will delve into the intricacies of event-driven strategies, explore various sub-strategies, assess the risks and opportunities, and provide real-world examples to illustrate key concepts.
What is an Event-Driven Strategy?
Event-driven strategy definition: An event-driven investment strategy involves investing in companies experiencing specific events that can significantly impact their valuation. These events often create temporary mispricings that savvy investors can exploit for profit.