TY - JOUR
T1 - Capital Market Efficiency and Arbitrage Efficacy
AU - Akbas, Ferhat
AU - Armstrong, Will J.
AU - Sorescu, Sorin
AU - Subrahmanyam, Avanidhar
N1 - Publisher Copyright:
Copyright © Michael G. Foster School of Business, University of Washington 2016.
PY - 2016/4/1
Y1 - 2016/4/1
N2 - Efficiency in the capital markets requires that capital flows are sufficient to arbitrage anomalies away. We examine the relation between flows to a quantitative (quant) strategy that is based on capital market anomalies and the subsequent performance of this strategy. When these flows are high, quant funds are able to implement arbitrage strategies more effectively, which in turn leads to lower profitability of market anomalies in the future, and vice versa. Thus, the degree of cross-sectional equity market efficiency varies across time with the availability of arbitrage capital.
AB - Efficiency in the capital markets requires that capital flows are sufficient to arbitrage anomalies away. We examine the relation between flows to a quantitative (quant) strategy that is based on capital market anomalies and the subsequent performance of this strategy. When these flows are high, quant funds are able to implement arbitrage strategies more effectively, which in turn leads to lower profitability of market anomalies in the future, and vice versa. Thus, the degree of cross-sectional equity market efficiency varies across time with the availability of arbitrage capital.
UR - http://www.scopus.com/inward/record.url?scp=84979222110&partnerID=8YFLogxK
U2 - 10.1017/S0022109016000223
DO - 10.1017/S0022109016000223
M3 - Article
AN - SCOPUS:84979222110
VL - 51
SP - 387
EP - 413
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
SN - 0022-1090
IS - 2
ER -