The Causal Effect of Limits to Arbitrage on Asset Pricing Anomalies

• 成果类型: Article
• 署名作者: Chu, Yongqiang; Hirshleifer, David; Ma, Liang
• 署名单位: University of North Carolina; University of North Carolina Charlotte; University of California System; University of California Irvine; National Bureau of Economic Research; University of South Carolina System; University of South Carolina Columbia
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12947
• 发表日期: 2020
• 页码: 2631-2672
• 关键词: cross-section; SHORT SALES; MARKET; RISK; profitability; constraints; INVESTMENT; management; OWNERSHIP; investors

摘要

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.