The Chipotle Paradox

Chipotle Mexican Grill, Inc. Class A common stock has one vote per share and Class B common stock has 10 votes per share. In a pricing paradox, the Chipotle Class A shares with inferior voting rights have sold at a persistent price premium of as much as 20% more than superior Class B shares. This paradox cannot be simply explained. Both classes of shares are actively traded on the NYSE, widely held, and closely followed on Wall Street by sophisticated institutional investors. The company is also a national concern that offers easy-to-understand products. The Chipotle Paradox suggests that patterns in stocks prices sometimes persist that are inconsistent with the law of one price and contrary to the efficient market hypothesis. The Chipotle Paradox also gives support to Lamont and Thaler's (2003a) contention that optimists can misprice faddish stocks when not enough rational investors are willing to meet excess demand by selling short