Event-driven - Financial definition
Concise definition of the term event-driven
In finance, event-driven refers to investment strategies that seek to exploit pricing inefficiencies caused by specific events such as mergers, acquisitions, bankruptcies, or other corporate actions.
Comprehensive definition of the term event-driven
Event-driven strategies in finance are a category of hedge fund and proprietary trading strategies that capitalize on stock price movements triggered by specific corporate events. These events can include mergers and acquisitions, restructurings, bankruptcies, spin-offs, and other significant company announcements. For instance, during a merger, an event-driven investor might buy the target company's stock and sell the acquiring company's stock to profit from the price convergence.
This strategy often requires deep research and analysis to predict the likelihood of an event's successful completion and its potential impact on stock prices. Event-driven investing plays a crucial role in financial markets by enhancing market efficiency and liquidity around corporate events.