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Evidence suggests that arbitragers exchange investment ideas. We analyze why and under what circumstances sharing occurs. Our model suggests that sharing ideas will lead to the following: more efficient asset prices, larger arbitrager profits, and correlated arbitrager returns. We predict that...
Persistent link: https://www.econbiz.de/10005835710
Evidence suggests that arbitragers exchange investment ideas. We analyze why and under what circumstances sharing occurs. Our model suggests that sharing ideas will lead to the following: more efficient asset prices, larger arbitrager profits, and correlated arbitrager returns. We predict that...
Persistent link: https://www.econbiz.de/10005835969
Maximization of result from operations with securities is not always ultimate goal of participants. For example, result can be exchanged into different currencies. There can be different utility functions that transform result into some asset. Different risk-neutral probability densities could...
Persistent link: https://www.econbiz.de/10011258552
This article is a supplement to previously published paper [1]. It represents a theoretical example that demonstrates a strategy based on exploiting of found market inefficiency. It is fundamental. Thus, what markets without this inefficiency should be is an open question. It is connected to...
Persistent link: https://www.econbiz.de/10011110254
This paper shows that information effects per se are not responsible for the Giffen goods anomaly affecting traders' demands in multi asset noisy, rational expectations equilibrium markets. The role that information plays in traders' strategies also matters. In a market with risk averse,...
Persistent link: https://www.econbiz.de/10010547268
We examine the risk-return characteristics of a rolling portfolio investment strategy where more than six thousand Nasdaq initial public offering (IPO) stocks are bought and held for up to five years. The average long-run portfolio return is low, but IPO stocks appear as ‘longshots’, as...
Persistent link: https://www.econbiz.de/10005124287
This paper investigates the information in monthly nominal Swedish real estate stock market returns from 1939-1998. Thus we test the weak form efficient market hypothesis. Our results contradict previous findings from the general Swedish stock market as we find very little evidence of seasonal...
Persistent link: https://www.econbiz.de/10005645207
If stock markets are efficient then it should not be possible to predict stock returns, i.e., no explanatory variable in a stock market regression model should be statistically significant. In this study, we find results indicating that daily effects exist in stock market returns. These daily or...
Persistent link: https://www.econbiz.de/10010598921
One potential reason for bubbles evolving prior to the financial crisis was excessive risk taking stemming from option-like incentive schemes in financial institutions. By running laboratory asset markets, we investigate the impact of option-like incentives on price formation and trading...
Persistent link: https://www.econbiz.de/10011019091
The concept of rational performance-chasing equilibrium in recent literature is supported neither by theory nor by empirical evidence. A more accurate model of such market dynamics is based on investor confusion, which is partly driven by some active managers' performance manipulation. Unlike...
Persistent link: https://www.econbiz.de/10008629470