Narbitrage risk and the book-to-market anomaly

Further analysis indicates that the turnover premium is greater for stocks with higher idiosyncratic volatility. A market anomaly in a financial market is predictability that seems to be inconsistent with. Arbitrage risk and the booktomarket anomaly university of arizona. The limits of arbitrage arbitrage futures contract. Arbitrage risk and the booktomarket anomaly by ashiq ali, lee. Arbitrage risk and the turnover anomaly request pdf. The bm effect for high volatility stocks exceeds that for the low volatility stocks in 20 of the 22 sample years. Citations of arbitrage risk and the booktomarket anomaly. This paper shows that the booktomarket bm effect is greater for stocks with higher idiosyncratic return volatility, higher transaction costs, and. Pairs are formed over a 12 month period according to a minimum distance criterion, and then traded over the subsequent 6. To recap the anomaly, whether risk is defined as volatility or beta and whether we consider all stocks or only large caps, low risk consistently outperformed high risk over this period.

Arbitrage arbitrage is defined as the simultaneous purchase and sale of the same, or essentially similar, security in two different markets for advantageously different prices sharpe and alexander 1990. Evidence from the mutual fund industry, journal of law and economics, university of chicago press, vol. These results are not limited to high booktomarket or small capital. Arbitrage risk and the booktomarket anomaly sciencedirect. Arbitrage risk and the book to market anomaly article in journal of financial economics 692. This paper shows that the booktomarket bm effect is greater for stocks with higher idiosyncratic return volatility, higher transaction costs and. Arbitrage risk and the booktomarket anomaly abstract this paper shows that the booktomarket bm effect is greater for stocks with higher idiosyncratic return volatility, higher transaction costs and lower investor sophistication, consistent with the market mispricing explanation for the anomaly.

This paper shows that the booktomarket bm effect is greater for stocks with higher idiosyncratic return volatility, higher transaction costs, and lower investor sophistication, consistent with the marketmispricing explanation for the anomaly. Arbitrage pricing theory and multifactor models of risk. This paper shows that the booktomarket bm effect is greater for stocks with higher idiosyncratic return volatility, higher transaction costs, and lower investor. Costly arbitrage and the myth of idiosyncratic risk, journal of accounting and economics, elsevier, vol. Arbitrage risk and the booktomarket anomaly by ashiq ali. Reits growth options and asset pricing dynamics across time, koc universitytusiad economic research forum working papers 3, koc universitytusiad economic research forum. Arbitrage risk and the booktomarket anomaly university. White center for financial research working papers 2792. Displayed and effective spreads by market revision of 492, rodney l.