Overcoming limits of arbitrage: Theory and evidence

• 成果类型: Article
• 署名作者: Hombert, Johan; Thesmar, David
• 署名单位: Hautes Etudes Commerciales (HEC) Paris
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2013.09.003
• 发表日期: 2014
• 页码: 26-44
• 关键词: Limits to arbitrage; Hedge funds; capital structure

摘要

Limits to arbitrage arise because financial intermediaries may face funding constraints when mispricing worsens. Using a model with limits to arbitrage, where we allow arbitrageurs to secure capital even in case of underperformance, we show that arbitrageurs that are more protected from withdrawals have more mean-reverting and volatile returns. Using data on hedge fund performance, we find robust support for these hypotheses: Funds with contractual impediments to withdrawals, and funds with performance-insensitive outflows, recover more quickly after a bad year and have more volatile returns. Our evidence is consistent with the idea that some hedge funds overcome the limits to arbitrage. (C) 2013 Elsevier B.V. All rights reserved.