.^''^^'^x Ocvt^ Hd28 .m414 Working Paper Alfred P. Sloan School of Management Holding Costs and Equilibrium Arbitrage Holding Costs and Equilibrium Arbitrage Aug 2 7 \ Holding Costs and Equilibrium Arbitrage

& ^ewey Working Paper Alfred P. Sloan School of Management Holding Costs and Equilrerium Arbitrage Holding Costs and Equilrerium Arbitrage Holding Costs and Equilibrium Arbitrage

This paper constructs a dynamic model of the equilibrium determination of relative prices when risk averse arbitragers face holding costs. The major fmdings are as follows: 1) Arbitragers reduce but do not eliminate mispricings. 2) Because arbitragers optimally take positions when mispricings are within the riskless arbitrage bounds, models based on riskless arbitrage arguments alone may not pr...

Synchronization risk and delayed arbitrage

We argue that arbitrage is limited if rational traders face uncertainty about when their peers will exploit a common arbitrage opportunity. This synchronization risk—which is distinct from noise trader risk and fundamental risk—arises in our model because arbitrageurs become sequentially aware of mispricing and they incur holding costs. We show that rational arbitrageurs ‘‘time the market’’ rat...

Hd28 .m414 S3 Dewey Working Paper Alfred P. Sloan School of Management Modelling the Aggregate Demand for Electricity: Simplicity vs. Virtuosity

Office of Research Testing Marketing Efficiency using Statistical Arbitrage with Applications to Momentum and Value Strategies

This paper introduces the concept of statistical arbitrage, a long horizon trading opportunity that generates a riskless profit and is designed to exploit persistent anomalies. Statistical arbitrage circumvents the joint hypothesis dilemma of traditional market efficiency tests because its definition is independent of any equilibrium model and its existence is incompatible with market efficienc...

Arbitrage in Housing Markets

Urban economists understand housing prices with a spatial equilibrium approach that assumes people must be indifferent across locations. Since the spatial no arbitrage condition is inherently imprecise, other economists have turned to other no arbitrage conditions, such as the prediction that individuals must be indifferent between owning and renting. This paper argues these non-spatial, no arb...