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Can the Market Add and Subtract? Mispricing in Tech Stock Carve-Outs / Owen A. Lamont, Richard H. Thaler.
- Format:
- Book
- Author/Creator:
- Lamont, Owen A.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w8302.
- NBER working paper series no. w8302
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2001.
- Summary:
- Recent equity carve-outs in US technology stocks appear to violate a basic premise of financial theory: identical assets have identical prices. In our 1998-2000 sample, holders of a share of company A are expected to receive x shares of company B, but the price of A is less than x times the price of B. A prominent example involves 3Com and Palm. Arbitrage does not eliminate these blatant mispricing due to short sale constraints, so that B is overpriced but expensive or impossible to sell short. Evidence from options prices shows that shorting costs are extremely high, eliminating exploitable arbitrage opportunities.
- Notes:
- Print version record
- May 2001.
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