Economics, Econometrics and Finance
4 years ago

Overvalued stocks thrive while undervalued ones struggle, defying arbitrage limits.

1 view
European Finance Review
The Limits of the Limits of Arbitrage
Alon Brav, J.B. Heaton, Si Li

Paper Summary

The study tested if limits to arbitrage can explain financial anomalies. They sorted securities based on idiosyncratic risk and found that undervaluation anomalies are not explained by these limits, but overvaluation anomalies are. This suggests that some factor premiums are not related to irrationality protected by limits to arbitrage.

Related papers

Economics, Econometrics and Finance
8 years ago

Unlocking Wealth: How Arbitrage Techniques Are Shaping Financial Markets

Option Pricing
Asset Pricing
Monetary Models
1 view
Economics, Econometrics and Finance
8 years ago

South African Financial Markets Offer Lucrative Profit Opportunities Through Arbitrage

Asset Pricing
Banking Finance
Value-based Management
1 view
Business, Management and Accounting
4 years ago

Unlocking Profit Potential: Merger Arbitrage Strategy Reveals Lucrative Investment Opportunities

Corporate Governance
Value-based Management
Asset Pricing
1 view