I test several explanations for the short-sale trading for a sample of the NYSE and the Nasdaq stocks during the 1988-2002 period. I find that short-selling activity is positively related to arbitrage opportunities and hedging demand, and negatively related to previous short-term returns. ANOVA analysis shows that the stock option listing is the most dominant variable in explaining the short-selling level. The short-selling level is more positively related to the dummy variables for convertible debt and option listing during the bubble period, suggesting that there was more room for arbitrage opportunity during that volatile period.
This study investigates the announcement effects of additions and deletions of individual stocks in the S&P REIT Index. The findings indicate a small but significant stock price reaction to additions. However, an addition or deletion has no impact on trading volume and institutional ownership. Overall, there is but limited opportunity for institutional investors to earn abnormal returns around changes in the REIT Index because of trading costs and other incidental expenses. However, individual investors may be able to exploit the arbitrage opportunity if their trading costs are lower. Finally, significant long-term valuation gains following deletions are found-apparently, deletions serve to discipline managers to improve performance.
The next terror attack on America could be a self-inflicted wound -- specifically a cigarette burn. Politicians expand tobacco taxes to discourage smoking and feed their own nicotine-like addiction to public spending. Like so many others, this government action smolders with unintended consequences. Tobacco taxes create a perfect arbitrage opportunity that radical Muslims exploit to collect money for terrorist groups that murder Americans and our allies. Tobacco taxes should be cut, or at least frozen, before they fuel further Islamic -- extremist violence.
... (FCC) addressed this game of regulatory arbitrage in the not-sosuccinctly-named In the Matter of Imp... remand the case to give the FCC the opportunity to provide an alternative legal justification for ...
This article examines whether mean reversion in stock index basis changes is actually induced by arbitrage trading, using intra-day arbitrage trade data. The empirical evidence suggests that arbitrage trading alone cannot account for all of the mean reversion in basis changes, even when infrequent trading is controlled for. This general mean reversion is consistent with mean reversion in liquidity and partial adjustment in the cash market. The behavior of arbitrageurs appears highly competitive. We find that on average the net arbitrage profit is at the competitive level of zero. Furthermore, it is suggested that some mispricing persistence may be related to time-varying liquidity. Accordingly, the results indicate that arbitrageurs pay attention to the depth of the market and value the...
... papers, these rules affect the opportunity cost of funds (Kawaller [1991], Kempf [1998]), and...
... in the trade as ?spreads, straddles, or arbitrage,? of from fixing limits which apply to such positi... each delivery month and the opportunity for arbitrage between the futures market and the c...
LONDON (HedgeWorld.com) - A new study by fund research provider Lipper finds that exchange-traded funds (ETF) can sometimes deviate from the market indices they are designed to track, providing a profit-making opportunity for market makers. Lipper, which is the parent company of HedgeWorld and a subsidiary of Reuters, examined 21 ETFs in the report. A significant arbitrage opportunity arises from the price inefficiencies of European ETFs pegged to international indices, the study found. The factors causing this included liquidity; inefficiencies in the creation-unit mechanism; trading-day differences between exchanges; and exchange-rate bias.
Monetary policy has traditionally been viewed as the process by which a central bank uses its influence over the supply of money to promote its economic objectives. This article highlights the important similarities in the monetary policy implementation systems used by many central banks. In these systems, there is a tight link between money and monetary policy because the supply of reserve balances must be set precisely in order to implement the target interest rate. This link creates tensions with the central bank's other objectives. The study also presents an approach to implementing monetary policy in which this link is severed, leaving the quantity of reserves and the interest rate target to be set independently. In this floor-system approach, interest is paid on reserve balances a...
... rate because this rate represents the opportunity cost of holding reserves. The central bank aims to... the penalty rate, there would be an arbitrage opportunity: banks could borrow reserves at the (l...
LONDON (HedgeWorld.com) - Fimat, the global brokerage firm, has added two more funds to the Fimat Volatility Arbitrage Median or FVAM. It brings to 11 the number of funds in the median. One new fund is the Global Vega Fund offered by Alopex Capital Management, a relative value global equity volatility arbitrage fund. The second new fund is the BAM Opportunity Fund offered by BAM Capital. It is a volatility arbitrage fund with a long volatility mandate.
In this paper we examine the relative efficiency of the U.S. and Swedish Stock Exchanges. Numerous stocks are cross-listed on United States Exchanges and the Swedish Stock Exchange. We compare the prices of these firms at near-simultaneous trading times. We find evidence of a lack of efficiency in these relative markets. Specifically, we find statistically significant pricing differences for six of the nine firms examined in the study indicating an inefficient market. We find that the pricing differences are reduced after 2003. We conduct a Granger Causality test to determine the existence and direction of causality in the series. We find that there is a feedback relationship between the U.S. price and the Stockholm price for eight of the nine series examined.
... efficiency and to determine if an arbitrage opportunity exists. If pricing differences between...
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