We examine the market mispricing and limits-to-arbitrage hypotheses on the positive relation between cash holdings and … volatility as proxies for limits-to-arbitrage, we show that the cash holding effects are strong among stocks with large … transaction and short selling costs, and high idiosyncratic volatility. This indicates that high arbitrage costs and risks prevent …

We examine the investor sentiment and limits-to-arbitrage explanations for the positive cross-sectional relation … volatility, indicating that arbitrage on the cash holding effect is costly and risky. In line with the limits-to-arbitrage …