Financial Fragmentation And Insider Arbitrage
نویسنده
چکیده
If there were no impediments to the ow of capital across space, then the returns to capital should be equalized. We provide evidence to the contrary. There are large di¤erences in the return to comparable investments across di¤erent towns in the state of Tamil Nadu in South India. We explore why these di¤erences are not arbitraged away and suggest that if an insider has monopoly power in arbitraging across towns then it is in his pro t-maximizing interest to reduce but not eliminate the di¤erences in returns to capital. JEL Codes: O16, G21
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