The Role of Activist Investing in Today's Financial Markets

Open Access
Author:
Eisner, Adam S
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Quanwei Cao, Thesis Supervisor
  • Brian Spangler Davis, Honors Advisor
Keywords:
  • Investing
  • Stocks
  • Equities
  • Activist
  • Value
  • Alpha
  • Raiders
  • Hedge Fund
  • Fund
  • Asset Management
  • Fama
  • French
Abstract:
Long term investing has been going on for centuries – from the simplest form, loaning somebody money in order to see a return in the future, to the most complex, advanced investment strategies employed by the asset managers of today. While simple investments are still made today, complex investment strategies have become attractive to those wishing to put their money to work for a long period of time, and see a large financial gain at the end. Traditionally, asset management strategies have involved buying or selling stock – going long or going short – and hedging away risk using derivatives and other hedging methods. Since the 1980s, several other investment strategies have been used by those trying to find the best possible investment for their money. Naming a few, we find strategies including quantitative investment, investment in foreign exchange, and activist investing. Activist investors, those taking a large stake in a public company by owning its equity, look to encourage asset prices to move in a direction favorable to them so that they may realize a financial return higher than if the stock would have been left alone in the open market, free to move without outside influence. This paper will examine whether activist stakes in a company truly provide higher returns than traditional strategies.