Risky arbitrage, limits of arbitrage, and nonlinear adjustment in the dividend-price ratio
UNSPECIFIED (2001) Risky arbitrage, limits of arbitrage, and nonlinear adjustment in the dividend-price ratio. ECONOMIC INQUIRY, 39 (4). pp. 524-536. ISSN 0095-2583Full text not available from this repository.
We provide a simple test of two alternative views of arbitrage activity: the risky arbitrage hypothesis and the limits of arbitrage hypothesis. For the US., the speed of reversion of the market log dividend-price ratio towards the fundamental equilibrium is a nonlinear, increasing function of the degree of mispricing, providing evidence supporting the risky arbitrage hypothesis. Further research might concentrate on particular sectors where the risks of arbitrage are greatest and its effect is therefore likely to be weakest.
|Item Type:||Journal Article|
|Subjects:||H Social Sciences > HC Economic History and Conditions|
|Journal or Publication Title:||ECONOMIC INQUIRY|
|Publisher:||WESTERN ECONOMIC ASSOC INT|
|Number of Pages:||13|
|Page Range:||pp. 524-536|
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