00Thaler_FM i-xxvi.qxd

unit root hypothesis for any of the twins. The estimates from the Dickey–Fuller test also give us a sense for the half-life of p ...

space, we focus on the largest twin pair, Royal Dutch/Shell, although simi- lar results obtain for all three twin pairs. While e ...

The larger point here is simply that Royal Dutch/Shell actively maintains its 60:40 policy, even intervening to offset asymmetri ...

6.3. Differences between the Parent Companies’ Expenditures Another potential explanation for the price disparities is that pare ...

in the value of control would lead to fluctuations in relative prices. The biggest problem with this story is that it fails to e ...

points. There is also no reason to think that the ex-dividend patterns are correlated with market movements. 6.7. Tax-induced In ...

trusts in the Netherlands and United States should also be indifferent be- tween Royal Dutch and Shell, while U.K. companies and ...

could act as the marginal investor to equalize prices. For example, we expect private investors and companies in the Netherlands ...

be classified as a “domestic” stock. (Note that causality here could easily run the other way, suggesting the possibility of mul ...

References Bodurtha, J., D. S. Kim, C. Lee, 1993, Closed-end country funds and U.S. market sentiment. University of Michigan and ...

PART I Limits to Arbitrage ...

...

Chapter 2 THE LIMITS OF ARBITRAGE Andrei Shleifer and Robert W. Vishny One of the fundamentalconcepts in finance is arbitrage, d ...

good faith money as well. In this near textbook case, the arbitrageur re- quired only DM6,500 of capital and collected his profi ...

In particular, the implications of the fact that arbitrage—whether it is ul- timately risk-free or risky—generally requires capi ...

The next section of the chapter presents a very simple model that illus- trates the mechanics of arbitrage. For simplicity, our ...

for reasons we describe below. We assume that F 1 is exogenously given, and specify the determination of F 2 below. At time t=2, ...

highest expected return according to his beliefs. Different investors hold different beliefs about various arbitrageurs’ abiliti ...

(lose) funds if they outperform (under perform) that benchmark. Because of the extremely poor quality of investors’ information, ...

to emerge in equilibrium under plausible circumstances. First, with limited liability or risk aversion, arbitrageurs might be un ...