The Effect of Arbitrage Constraints on Stock Returns

• 발행기관: 한국자료분석학회
• 저자명: Taehyuk Kim
• 간행물 정보: 『Journal of The Korean Data Analysis Society (JKDAS)』Vol.20 No.5, 2237~2247쪽, 전체 11쪽
• 주제분류: 자연과학 > 통계학
• 파일형태: PDF
• 발행일자: 2018.10.31

영문 초록

The traditional view on stock return proposes that stock price changes due to systematic changes in the fundamental value of the firm. But the view of behavioral finance as an alternative to the view of the fundamentalist conjectures that the limits to arbitrage and investors psychology actually affects stock price. Limits to arbitrage prevent sophisticated investors from quickly exploiting mispricings. Jacob (2015) reports that time varying limits to arbitrage and investors sentiment play an important role in explaining various market anomalies. This paper attempts to investigate into the effect of arbitrage limits on the price of stocks traded in the Korean stock market. We constructed the arbitrage limits index using principal component of five arbitrage limit variables. Our findings are as follows; 1) while market risk, SMB, and HLM shows positive impacts on the return of individual stock, arbitrage constraint index has negative impact. 2) after controlling market risk, a negative ACI effect appears in the highest BM portfolio. 3) all the coefficients of the arbitrage constraint index for 25 size-BM quintile portfolios are significantly negative after controlling size or (and) value risk. These results imply that limits to arbitrage systematically affect the stock price of Korean firms.

목차

1. Introduction

2. Limits to arbitrage and data

3. Empirical results

4. Conclusion

References

키워드

arbitrage constraints arbitrage constraints index market anomalies arbitrage constraints and stock return