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Information Exchange and the Limits of Arbitrage

Gray, Wesley - Volkswirtschaftliche Fakultät, … - 2008

Evidence suggests that arbitragers exchange investment ideas. We analyze why and under what circumstances sharing occurs. Our model suggests that sharing ideas will lead to the following: more efficient asset prices, larger arbitrager profits, and correlated arbitrager returns. We predict that...

Persistent link: https://www.econbiz.de/10005835969

Investor Psychology and Asset Pricing

Hirshleifer, David - Volkswirtschaftliche Fakultät, … - 2001

The basic paradigm of asset pricing is in vibrant flux. The purely rational approach is being subsumed by a broader approach based upon the psychology of investors. In this approach, security expected returns are determined by both risk and misvaluation. This survey sketches a framework for...

Persistent link: https://www.econbiz.de/10005619847

Additional utility of insiders with imperfect dynamical information

Corcuera, José Mª; Imkeller, Peter; Kohatsu, Arturo; … - Department of Economics and Business, Universitat … - 2003

In this paper we consider an insider with privileged information that is affected by an independent noise vanishing as … the revelation time approaches. At this time, information is available to every trader. Our financial markets are based on … additional noise in the insider’s information vanishes is slow enough then there is no arbitrage and the additional utility of …

Persistent link: https://www.econbiz.de/10005772029

Do short-sellers arbrtrage accrual-based return anomalies?

Hirshleifer, David; Teoh, Siew Hong; Yu, Jeff Jiewei - Volkswirtschaftliche Fakultät, … - 2007

We find a positive association between short-selling and accruals, and between short-selling and NOA, during 1988-2003. The accrual and NOA return anomalies are asymmetric. The absolute value of mean abnormal returns is larger for high-accrual firms than low-accrual firms on NASDAQ, but not on...

Persistent link: https://www.econbiz.de/10005617014

Project valuation and investment decisions: CAPM versus arbitrage

Magni, Carlo Alberto - Volkswirtschaftliche Fakultät, … - 2007

This paper shows that (i) project valuation via disequilibrium NPV+CAPM contradicts valuation via arbitrage pricing, (ii) standard CAPM-minded decision makers may fail to profit from arbitrage opportunities, (iii) standard CAPM-based valuation violates value additivity. As a consequence, the...

Persistent link: https://www.econbiz.de/10005260104

Correct or incorrect application of CAPM? Correct or incorrect decisions with CAPM?

Magni, Carlo Alberto - Volkswirtschaftliche Fakultät, … - 2007

This paper focuses on inconsistencies arising from the use of NPV and CAPM for capital budgeting. It shows that (i) CAPM capital budgeting decision-making based on disequilibrium NPV is deductively inferred by the Capital Asset Pricing Model, (ii) the use of the disequilibrium NPV is widespread...

Persistent link: https://www.econbiz.de/10005836868

Firm Value and the mis-use of the CAPM for valuation and decision making

Magni, Carlo Alberto - Volkswirtschaftliche Fakultät, … - 2005

This paper shows that a decision maker using the CAPM for valuing firms and making decisions may contradict Modigliani and Miller’s Proposition I, if he adopts the widely-accepted disequilibrium NPV. As a consequence, CAPM-minded agents employing this NPV are open to arbitrage losses and miss...

Persistent link: https://www.econbiz.de/10004980381

CAPM-based capital budgeting and nonadditivity

Magni, Carlo Alberto - Volkswirtschaftliche Fakultät, … - 2006

This paper deals with the CAPM-derived capital budgeting criterion, and in particular with Rubinstein’s (1973) criterion, according to which a project is profitable if the project rate of return is greater than the risk-adjusted cost of capital, where the latter depends on the project’s...

Persistent link: https://www.econbiz.de/10005616980

Firm Value and the mis-use of the CAPM for valuation and decision making

Magni, Carlo Alberto - Volkswirtschaftliche Fakultät, … - 2005

Persistent link: https://www.econbiz.de/10005617129

Axiomatization of residual income and generation of financial securities

Ghiselli Ricci, Roberto; Magni, Carlo Alberto - Volkswirtschaftliche Fakultät, … - 2009

This paper presents an axiomatization of residual income, aka excess profit, and illustrates how it may univocally engenders fixed-income or variable-income assets. In the first part it is shown that, depending on the relations between excess profit and the investor's excess wealth, a...

Persistent link: https://www.econbiz.de/10005619494