Does arbitrage flatten demand curves for stocks?

被引:389
作者
Wurgler, J [1 ]
Zhuravskaya, E
机构
[1] NYU, New York, NY 10012 USA
[2] Ctr Econ & Financial Res Moscow, Moscow, Russia
关键词
D O I
10.1086/341636
中图分类号
F [经济];
学科分类号
02 ;
摘要
In textbook theory, demand curves for stocks are kept flat by riskless arbitrage between perfect substitutes. In reality, however, individual stocks do not have perfect substitutes. We develop a simple model of demand curves for stocks in which the risk inherent in arbitrage between imperfect substitutes deters risk-averse arbitrageurs from flattening demand curves. Consistent with the model, stocks without close substitutes experience higher price jumps upon inclusion into the S&P 500 Index. The results suggest that arbitrage is weaker and mispricing is likely to be more frequent and more severe among stocks without close substitutes.
引用
收藏
页码:583 / 608
页数:26
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