Does Arbitrage Flatten Demand Curves for Stocks

By Jeffrey Wurgler, E. Zhuravskaya. 2000

718 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/dc997adddd77d9118863024297a3ffba260d3048

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Citations in the corpus

The geography of asset trade and the euro: insiders and outsiders (2009, result): “These numbers are a bit lower than other estimates in the literature which found values between 6 and 12 for equities (see Loderer et al. (1991), Wurgler and Zhuravskaya (2002) and Martin and Rey (2006) for a short survey of those elasticities).”
Anticipated and repeated shocks in liquid markets (2013, neutral): “For example, Kaul, Mehrotra, and Morck (2000), Wurgler and Zhuravskaya (2002), Mitchell, Pulvino, and Stafford (2004), Greenwood (2005), Coval and Stafford (2007), Frazzini and Lamont (2008), and Lou (2010) analyze the temporary price effects of index additions/deletions, short-selling induced by…”
Limits of Arbitrage (2010, neutral): “(6) Combining (5) and (6), we find the equilibrium price of asset A: pA = d̄A + ασ2A(1− ρ2)u. (7) 7Our analysis of cross-asset arbitrage is related to Wurgler & Zhuravskaya (2002).”
S&P 500 Index Additions and Earnings Expectations (2003, background): “Wurgler and Zhuravskaya (2002) recognize that “perhaps S&P 500 addition really does reflect good news about the prospects of the company, despite S&P’s claim to the contrary” (p. 2) but they conduct no tests to determine whether such an effect is at work.”
Corporate Financing Decisions When Investors Take the Path of Least Resistance (2007, neutral): “Shleifer (1986), Harris and Gurel (1986), and more recently Kaul, Mehrotra, and Morck (2000), Wurgler and Zhuravskaya (2002), and Greenwood (2005) illustrate the price impact of uninformed demand, by examining index inclusion and rebalancing decisions.”
Ownership Structure , Limits to Arbitrage and Stock Returns: Evidence from Equity Lending Markets (2016, positive): “Following Wurgler and Zhuravskaya (2002), we define arbitrage risk as the standard deviation of the residuals based on the Carhart (1997) fourfactor model of returns, which measures the volatility of the portion of returns that cannot be hedged by standard risk factors.”
The Price Response to S&P 500 Index Additions and Deletions: Evidence of Asymmetry and a New Explanation (2004, neutral): “Based on different sample periods following the surge in popularity of indexing as an investment vehicle, Shleifer (1986), Beneish and Whaley (1996), Lynch and Mendenhall (1997), Blume and Edelen (2001), and Wurgler and Zhuravskaya (2002) find support for the downward sloping demand curve.”
Exchange Traded Funds and Asset Return Correlations (2013, neutral): “A large literature on stock comovement has found that adding a stock to an index affects its price (Harris & Gurel, 1986; Kaul, Mehrotra, & Morck, 2002; Lynch & Mendenhall, 1997; Shleifer, 1986; Wurgler and Zhuravskaya, 2002) and correlation between the newly added stocks and other stocks in the ind”
Does investor sentiment really matter (2016, background): “Wurgler and Zhuravskaya (2002) argue that since stocks are imperfect substitutes, it is not possible to eliminate such risk.”
Why is the Accrual Anomaly not Arbitraged Away? The Role of Idiosyncratic Risk and Transaction Costs (2006, positive): “Following Pontiff (1996) and Wurgler and Zhuravskaya (2002), we use idiosyncratic risk of a firm’s stock as our empirical proxy for arbitrage risk. Although at first blush, this approach appears rough and ready, Wurgler and Zhuravskaya (2002) present empirical evidence that little is gained by condu”
R2 and Idiosyncratic Risk are not Interchangeable (2014, background): “Several other papers have relied on Pontiff’s (1996) proxy of idiosyncratic return volatility as a proxy for barriers to arbitrage (e.g., Wurgler and Zhuravskaya 2002; Ali, Hwang, and Trombley 2003; Mendenhall 2004; Mashruwala et al. 2006; Pontiff 2006; Pincus, Rajgopal, and Venkatachalam 2007;…”
Managing Underwriters and the Marketing of Seasoned Equity Offerings (2010, neutral): “…or deletions of index components also find support for a negatively sloped demand curve (see Harris and Gurel (1986), Shleifer (1986), Dhillon and Johnson (1991), Lynch and Mendenhall (1997), Kaul, Mehrotra, and Morck (2000), Wurgler and Zhuravskaya (2002), and Greenwood (2005), among others).”
Investor Sentiment and the Mean-Variance Relation (2011, background): “It has been well 12High idiosyncratic risk makes relative-value arbitrage especially risky (Wurgler and Zhuravskaya (2002)).”
Costly arbitrage and the myth of idiosyncratic risk (2006, background): “Wurgler and Zhuravskaya (2002) in defending the use of idiosyncratic risk as an arbitrage cost, claim that idiosyncratic is relevant because, ‘‘First, as a practical matter, arbitrageurs are often not fully diversifiedy.”