00Thaler_FM i-xxvi.qxd

When S 2 =0, arbitrageurs liquidate their position at a gain at t=2, and hold cash until t=3. In this case, W=a(D 1 ∗V/p 1 +F 1 ...

(Snot too large relative to S 1 ). That is to say, the initial displacement must be very large and prices should be expected to ...

at t=1. As a result, they have more funds at t=2 to counter mispricing at that time. A more interesting question is how prices b ...

Proposition 3 describes the extreme circumstances in our model, in which fully invested arbitrageurs experience an adverse price ...

This result contrasts with the more standard models, in which arbi- trageurs are most aggressive when prices are furthest away f ...

results that arbitrage is very limited. Although it is difficult to deny that PBA plays some role in the world, the question rem ...

not fully invested in a particular arbitrage strategy, significant losses in that strategy will induce voluntary liquidation beh ...

While even such arbitrage must deal with problems of possible interim liqui- dations, in most real-world situations arbitrageurs ...

At first this claim seems counterintuitive, since high volatility may be as- sociated with more frequent extreme mispricing, and ...

raises expected returns when security markets are segmented and investors must incur a fixed cost to become informed and partici ...

As we argue in this article, the theoretical underpinnings of the efficient markets approach to arbitrage are based on a highly ...

arbitrage returns on the value portfolio are volatile. Even though this risk may be idiosyncratic, it cannot be hedged by arbitr ...

noisy and the payoff horizon is short (such as the small firm effect in Janu- ary). A “noisy” anomaly like the value-glamour ano ...

References Allen, Franklin, 1990, The market for information and the origin of financial inter- mediation, Journal of Financial ...

Sharpe, William, 1964, Capital asset prices: A theory of market equilibrium under conditions of risk, Journal of Finance19, 425– ...

Chapter 1 A SURVEY OF BEHAVIORAL FINANCE Nicholas Barberis and Richard Thaler Introduction The traditional finance paradigm, w ...

This review essay evaluates recent work in this rapidly growing field. In section 2, we consider the classic objection to behavi ...

2.Limits to Arbitrage 2.1. Market Efficiency In the traditional framework where agents are rational and there are no frictions, ...

an investment strategy that offers riskless profits at no cost. Presumably, the rational traders in Friedman’s fable became know ...

are well aware of this risk, which is why they short a substitute security such as General Motors at the same time that they buy ...