Previous research documents that risk-arbitrageurs earn positive abnormal returns. However, this research treats the sum of two risks, deal risk and liquidity risk, as a measure of deal risk alone. We employ a forward looking measure of liquidity risk – the VIX – and we show that...

Two separate strands in the existing literature document that (1) the value premium may be the reward for risk generated by disagreement between investors with heterogeneous beliefs about future stock payoffs (Doukas et. al. 2002, 2004), and that (2) poor quality of accounting information is an...