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The Causal Effect of Limits to Arbitrage on Asset Pricing Anomalies / Yongqiang Chu, David Hirshleifer, Liang Ma.
- Format:
- Book
- Author/Creator:
- Chu, Yongqiang.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w24144.
- NBER working paper series no. w24144
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2017.
- Summary:
- We examine the causal effect of limits to arbitrage on 11 well-known asset pricing anomalies using the pilot program of Regulation SHO, which relaxed short-sale constraints for a quasi-random set of pilot stocks, as a natural experiment. We find that the anomalies became weaker on portfolios constructed with pilot stocks during the pilot period. The pilot program reduced the combined anomaly long-short portfolio returns by 72 basis points per month, a difference that survives risk adjustment with standard factor models. The effect comes only from the short legs of the anomaly portfolios.
- Notes:
- Print version record
- December 2017.
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