Fundamental strength strategy: The role of investor sentiment versus limits to arbitrage

This paper evaluates the return predictability of fundamental strength in a two-dimensional framework that considers both investor sentiment and limits to arbitrage simultaneously. Sentiment and limits to arbitrage have independent and overlapping explanatory power on the return predictability of fundamental strength. The return predictability of fundamental strength is more pronounced among stocks with high arbitrage costs following high sentiment. Among stocks with low arbitrage costs, the fundamental strength strategy is profitable only following high sentiment. However, among stocks with high arbitrage costs, the same strategy can earn economically and statistically significant profits even following low sentiment. Consistent with Miller (1977), we emphasize the interaction of sentiment and limits to arbitrage on stock valuation.     

Detection of arbitrage in a market with multi-asset derivatives and known risk-neutral marginals

In this paper we study the existence of arbitrage opportunities in a multi-asset market when risk-neutral marginal distributions of asset prices are known. We first propose an intuitive characterization of the absence of arbitrage opportunities in terms of copula functions. We then address the problem of detecting the presence of arbitrage by formalizing its resolution in two distinct ways that are both suitable for the use of optimization algorithms. The first method is valid in the general multivariate case and is based on Bernstein copulas that are dense in the set of all copula functions. The second one is easier to work with but is only valid in the bivariate case. It relies on results about improved Fréchet–Hoeffding bounds in presence of additional information. For both methods, details of implementation steps and empirical applications are provided.     

Liquidity and Arbitrage in Options Markets: A Survival Analysis Approach

This paper examines the determinants of the time it takes foran index options market to return to no arbitrage values afterput-call parity deviations, using intraday transactions datafrom the French index options market. We employ survival analysisto characterize how limits to arbitrage influence the expectedduration of arbitrage deviations. After controlling for conventionallimits to arbitrage, we show that liquidity-linked variablesare associated with a faster reversion of arbitrage profits.The introduction of an Exchange Traded Fund also affects thesurvival rates of deviations, but this impact essentially stemsfrom the reduction in the level of potential arbitrage profits.     

Convertible Bond Arbitrage: Risk and Return

Abstract:  This paper specifies a simulated convertible bond arbitrage portfolio to characterise the risks in convertible bond arbitrage. For comparison the risk profile of convertible bond arbitrage hedge fund indices at both monthly and daily frequencies is also examined. Results indicate that convertible bond arbitrage is positively related to default and term structure risk factors. These risk factors are augmented with the simulated convertible bond arbitrage portfolio, mimicking a passive investment in convertible bond arbitrage, to assess the risk and return of individual hedge funds. We provide estimates of the performance of two hedge fund indices (an equally weighted and value weighted index) and a sample of convertible bond arbitrage hedge funds using a factor model methodology. Lagged and contemporaneous observations of the risk factors are specified, controlling for illiquidity in the securities held by funds. Our results cover two time periods. Initially we find evidence of abnormal risk adjusted returns in the individual hedge fund data and the equally weighted hedge fund index and no evidence of abnormal risk adjusted returns in the value weighted hedge fund index. When we examine performance during the credit crisis of 2007 and 2008 we find evidence of negative abnormal returns amongst individual hedge funds and the hedge fund indices.     

Arbitrage and the Evaluation of Linear Factor Models in UK Stock Returns

I examine the impact of the no arbitrage restriction on the estimation and evaluation of linear factor models in UK stock returns. The no arbitrage restriction reduces volatility and eliminates most of the negative values of the fitted stochastic discount factor models. All of the factor models are rejected and there are significant differences in the pricing performance between models under the no arbitrage restriction. The no arbitrage restriction can have a significant impact on both the parameter estimates and pricing errors for some models.     

The exchange rate effect of multi-currency risk arbitrage

Carry trade arbitrage strategies typically involve multiple currencies. Limits to arbitrage in such a setting not only slow the adjustment to the fundamental equilibrium, but can also generate transitory over- or undershooting of each exchange rate in accordance with the marginal risk contribution of each speculative position to the overall arbitrage risk. The paper uses a natural experiment to identify a particular global arbitrage opportunity and shows that arbitrage risk hedging modifies the exchange rate dynamics in the predicted manner. New spectral methods are applied to obtain a more precise inference on the cross-sectional trading pattern of the arbitrageurs.     

Arbitrage,Continuous Trading,and Margin Requirements

This paper studies the impact that margin requirements have on both the existence of arbitrage opportunities and the valuation of call options. In the context of the Black-Scholes economy, margin restrictions are shown to exclude continuous-trading arbitrage opportunities and, with two additional hypotheses, still to allow the Black-Scholes call model to apply. The Black-Scholes economy consists of a continuously traded stock with a price process that follows a geometric Brownian motion and a continuously traded bond with a price process that is deterministic.     

The determinants of a cross market arbitrage opportunity: theory and evidence for the European bond market

This paper examines the determinants of cross-platform arbitrage profits. We develop a structural model that enables us to decompose the likelihood of an arbitrage opportunity into three distinct factors: the fixed cost to trade the opportunity, the level at which one of the platforms delays a price update and the impact of the order flow on the quoted prices (inventory and asymmetric information effects). We then investigate the predictions from the theoretical model for the European Bond market with the estimation of a probit model. Our main finding is that the results found in the empirical part corroborate strongly the predictions from the structural model. The event of a cross market arbitrage opportunity has a certain degree of predictability where an optimal ex ante scenario is represented by a low level of spreads on both platforms, a time of the day close to the end of trading hours and a high volume of trade.     

税收竞争和税收套利对国际税收制度的挑战

当前被动投资的税收竞争、主动投资的税收竞争和税收套利等问题阻碍了单一税收原则和受惠原则的实践运用。本文介绍了税收竞争和税收套利对国际税收制度的挑战,并以OECD成员国的应对为例,阐述了OECD成员国不断与时俱进修订税收法规的历程,试图引起人们关注国际税收制度的完善。     

Tax arbitrage restrictions and financial leverage clienteles

This paper argues that while total short sale constraints are often introduced to rule out tax arbitrage, such constraints are both unrealistic and conceptually problematic. Instead, milder constraints are advocated, which prevent tax arbitrage while still allow short positions. It is demonstrated that a model with these constraints employed can support bond pricing as in the Miller equilibrium, although it leads to a richer set of tax clienteles.     

Daily short interest,idiosyncratic risk,and stock returns

This paper examines the relation between short selling and returns and the impact of arbitrage costs on short sellers’ behavior. Using daily UK short selling data, we find that stocks with low short interest levels experience significant positive returns on both an equal- and value-weighted basis. Economic theory predicts that short sellers avoid establishing positions in stocks with high idiosyncratic risk. Our results indicate a negative relation between short interest and returns among high idiosyncratic risk stocks and that short selling activity is mostly concentrated in low idiosyncratic risk stocks where it is less costly to arbitrage fundamental risk.     

Stock index futures arbitrage in emerging markets: Polish evidence

The efficiency of the market for stock index futures and profitability of arbitrage for contracts on the Warsaw Stock Exchange Index WIG20 is studied in this paper. The Polish market has unique attributes: in a relatively short time the risk-free interest rate has decreased significantly, short sale cannot be used to construct an arbitrage position by institutional investors, and the dividends are small and paid in an irregular manner. Examining intraday transaction data shows that ex post and ex ante violations for short arbitrage reveal almost all properties of a mature market. Nonetheless, findings for long arbitrage indicate inefficiency of the market.     

Are performance based arbitrage effects detectable? Evidence from merger arbitrage

This paper examines the predictions of the performance based arbitrage hypothesis for the merger arbitrage market. Performance based arbitrage [Shleifer, A., Vishny, R.W., 1997. The limits of arbitrage. Journal of Finance, 52 (1), 35–55] is the notion that funds under management are withdrawn from arbitrageurs following trading losses, resulting in inefficient prices for securities subject to arbitrage trades. I examine general comovement in merger arbitrage spreads and the response of spreads to large arbitrage losses and substantial changes in deal flow. I find little evidence that merger arbitrage spreads exhibit systematic comovement or are substantially affected by important liquidity events in this market.     

资产透明度、监管套利与银行系统性风险

资产不透明的金融机构过度依赖批发性融资进行监管套利不利于系统性风险的防控。在此背景下,本文首先在经典银行道德风险模型的基础上引入关联性,从资产透明度和监管套利的视角分析银行系统性风险累积的内在机理。而后利用2007-2018年中国上市银行微观数据,构建资产透明度指标和系统性风险指标(SRISK、MES),对理论推论进行实证检验。主要结论有:(1)资产不透明、监管套利会提高银行的系统性风险。(2)监管套利弱化了资产透明度和资本监管机制对银行系统性风险承担的约束作用,资产透明度与资本监管机制在约束系统性风险承担中的协调作用不明显。(3)以大银行为主的债权银行受监管套利的影响相较于受资产透明度的影响更明显。在此基础上,我们对完善金融风险防范体系以及监管机制提出了若干建议。     

跨境资金流入与外汇监管机制研究——聊城涉外企业案例

我国作为新兴市场经济体正面临着资本流入激增的压力,出现了异常和持续的跨境资金通过预收货款渠道长驱直入,实现套利目的的新特点。本文以山东省聊城市涉外企业预收货款套利为例,分析跨境资金流入的情形、趋势、影响,并对进一步抑制异常跨境资金套利的监管机制提出合理化建议,以弱化其对经济金融发展的不利影响。     

高频数据下基于组合预测思想的统计套利策略创新设计与实证研究

采用两只股票的日数据和5种高频数据,借鉴组合预测思想,综合利用协整模型和新卡尔曼滤波模型,与统计套利策略具体目标相结合,设计出新统计套利组合策略,实证分析数据频率、策略选择对统计套利效果的影响。结果表明：运用高频数据及引入卡尔曼滤波模型均有效,但卡尔曼滤波模型与协整模型不存在明显优劣之分,选择组合策略是必要的;组合策略收益性显著优于采取单一模型的套利策略;组合策略下的套利组合随数据频率提高,收益率波动性更小、更稳定;组合策略接近市场中性,能很好地免疫市场风险。     

基于会计信息的证券投资策略研究:分析及展望

本文首先分析了有效资本市场理论的悖论及行为金融学对其的挑战,其中着重探讨了套利成本和套利局限性对证券价格形成的影响。然后阐述了基于会计信息进行证券投资策略研究的问题。本文认为,这方面的会计学研究能够对提高我国证券市场的效率起到至关重要的作用。     

Costly arbitrage and idiosyncratic risk: Evidence from short sellers

Previous studies have shown that high short interest stocks have low subsequent returns. We test whether the persistence of this effect is due to costs limiting arbitrage. The arbitrage cost that we focus on is idiosyncratic risk which, regardless of the arbitrageur’s level of diversification, deters arbitrage activity. Consistent with costly arbitrage, we find that among high short interest stocks a one standard deviation increase in idiosyncratic risk predicts a more than 1% decline in monthly returns. Moreover, idiosyncratic risk does not predict returns across low short interest stocks, and short interest does not predict low returns across low idiosyncratic risk stocks. Our results are robust to commonly used proxies for both transaction costs and short sale constraints.     

商业银行监管资本套利的均衡分析

监管资本套利,产生于巴塞尔协议资本监管框架的缺陷,是一种利用资本监管制度之间的差异性以及制度内部的不协调性,运用某种手段在不改变实际风险水平的情况下提高资本充足率水平的行为。通过对以下问题的探讨:商业银行监管资本套利所获得的收益在银行与资金需求方之间的配置比例;针对某种资产的监管资本套利,对其他资产供求双方所产生的隐性套利收益的表现形式及其归属程度;由商业银行异质性所导致的监管套利顾客现象;信息不对称情况下,市场对于套利者与非套利者的逆向选择等等,认为银行监管部门应适当引导符合政策意图的套利行为,提高政策引导调控能力。     

Tax Arbitrage and the Existence of Equilibrium Prices for Financial Assets

In models where both investors and securities are subject to differential taxation, there may be no set of prices that rule out infinite gains to trade, or “tax arbitrage.” This paper characterizes the joint restrictions on financial-asset returns and investors' tax schedules that preclude tax arbitrage in the absence of short-sale constraints. The authors show that, if there exists any configuration of marginal tax rates on investors' tax schedules that rule out infinite gains to trade, then “no-tax-arbitrage” prices will exist. They also show that the existence of “no-tax-arbitrage” prices ensures the existence of equilibrium prices.