Limits to arbitrage: The Case of single stock futures and spot prices

dc.contributor.author	Aggarwal, Nidhi
dc.date.accessioned	2015-12-02T10:29:33Z
dc.date.available	2015-12-02T10:29:33Z
dc.date.issued	2015-05
dc.identifier.uri	http://hdl.handle.net/2275/358
dc.description.abstract	Market frictions limit arbitrage, but these frictions affect different stocks differently. Using intraday data on a liquid single stock futures and spot market, we examine the arbitrage efficiency of these two markets. We find evidence of significant cross- sectional variation in the size and asymmetricity of no-arbitrage bands. To the extent that market frictions affect all stocks similarly, commonality in the size of the bands is expected. 17% of variation in the size of the bands is explained by the first principal component. Changes in funding liquidity is a key factor that determines variation in the common component.	en_US
dc.language.iso	en	en_US
dc.relation.ispartofseries	WP;WP-2015-010
dc.subject	Limits to arbitrage	en_US
dc.subject	mispricing	en_US
dc.subject	no-arbitrage bands	en_US
dc.subject	short-selling constraints	en_US
dc.subject	transactions costs	en_US
dc.subject	funding constraints	en_US
dc.title	Limits to arbitrage: The Case of single stock futures and spot prices	en_US
dc.type	Working Paper	en_US