Detecting, characterizing, and predicting arbitrage opportunities in international rights issues Manuel Verdú Henares, Óscar Carchano Alcina, Jesús Ruiz Andújar Research in International Business and Finance, 2025 Capital increases through the issuance of subscription rights are a financing tool employed by many companies as an alternative to debt issuance. In a process with numerous implications for both the company itself and the financial markets, market anomalies, such as arbitrage opportunities, may arise. To examine whether this issue occurs, a sample of 2583 capital increases carried out by companies located in 27 different countries was collected, and a strategy aimed at exploiting potential discrepancies between the prices of newly issued shares and existing ones was applied. The returns obtained will be subjected to various statistical and econometric tests to explain which factors may play a significant role in their formation. The results confirm the presence of these market anomalies and indicate that a higher proportion of new shares relative to existing ones increases the likelihood of these anomalies, whereas their occurrence appears to be weaker or absent when the company is listed on a stock index. These and other minor or control factors (the objective of the process or the economic sector of the firm) enable a high success rate in predicting when such anomalies are likely to form. These findings provide relevant information to all economic agents involved on how to mitigate these market anomalies. • This manuscript analyzes 2583 equity offerings with subscription rights made in 27 different countries. • A trading strategy is applied to determine whether arbitrage opportunities have existed. • Several tests are applied to check the significance and robustness of the arbitrage opportunities detected. • A set of factors is identified that may explain, and in some cases, even precede, the occurrence of these anomalies. • Examples of real trading cases are given in which the strategy has generated the expected theoretical result.
Arbitrage opportunities and event impacts on Spanish rights issues Manuel Verdú, Óscar Carchano, José Emilio Farinós Applied Economics Letters, 2024 In equity offerings in which pre-emptive subscription rights are issued, there are two ways of acquiring the company’s shares: either by buying them directly on the market, or by subscribing to the new shares using the subscription rights. This could lead to the existence of arbitrage opportunities. In addition, the announcement of these processes incorporates very relevant information to the market, which could generate abnormal returns for the shares. This paper analyses both hypotheses simultaneously on the same sample and concludes that there are indeed arbitrage opportunities and also abnormal returns can be detected. Furthermore, it is also concluded that these effects are especially significant in companies with low liquidity or for which short positions in the market are not available.
