The Causal Effect of Limits to Arbitrage on Asset Pricing Anomalies /
Chu, Yongqiang.
The Causal Effect of Limits to Arbitrage on Asset Pricing Anomalies / Yongqiang Chu, David Hirshleifer, Liang Ma. - Cambridge, Mass. National Bureau of Economic Research 2017. - 1 online resource: illustrations (black and white); - NBER working paper series no. w24144 . - Working Paper Series (National Bureau of Economic Research) no. w24144. .
December 2017.
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.
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Mode of access: World Wide Web.
The Causal Effect of Limits to Arbitrage on Asset Pricing Anomalies / Yongqiang Chu, David Hirshleifer, Liang Ma. - Cambridge, Mass. National Bureau of Economic Research 2017. - 1 online resource: illustrations (black and white); - NBER working paper series no. w24144 . - Working Paper Series (National Bureau of Economic Research) no. w24144. .
December 2017.
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.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.