Event-Driven Investing

Event-driven investing is an investment strategy that seeks to capitalize on price inefficiencies caused by specific corporate events, such as mergers, acquisitions, bankruptcies, restructurings, or spin-offs. Investors using this strategy analyze how these events might affect a company’s stock price and make trades accordingly, often taking advantage of short-term market dislocations. Event-driven investing can involve taking long or short positions depending on the expected impact of the event. Hedge funds commonly employ this strategy, as it requires specialized knowledge of corporate finance and market dynamics..

Example

An investor might buy shares of a company targeted for acquisition, betting that the stock price will rise as the deal progresses.