What is a critical characteristic of event-driven strategies?

Event-driven strategies are characterized by their focus on specific corporate events, such as mergers, acquisitions, restructurings, earnings announcements, or other significant occurrences that can affect a company's valuation and stock price. These strategies aim to capitalize on the price discrepancies that arise from these events, often before the market has fully reacted to the information. By analyzing the likelihood and potential outcomes of the events, investment managers can make informed decisions to enhance returns.

In contrast, the other options do not accurately capture the essence of event-driven strategies. For instance, relying purely on economic indicators (the first option) pertains to fundamental analysis rather than the distinct influence of specific corporate events. Focusing on regulatory changes (the second option) may be part of some investment strategies but is too narrow and does not encompass the wide array of corporate events an event-driven strategy might consider. Finally, averaging historical returns (the last option) suggests a passive investment approach often seen in quantitative analysis, which does not align with the opportunistic nature of event-driven investing that thrives on immediate, real-time information related to specific occurrences.