Allocative inefficiencies in online auction markets can result in the loss of revenues for sellers. It can also cause frustration for buyers who fail to win an item despite placing bids higher than other winners. The main contention of this work is that allocative inefficiencies present arbitrage opportunities, though not strictly in the traditional financial market sense, where risk-free profi...

If arbitrage is costly and noise traders are active, asset prices may deviate from fundamental values for long periods of time. We use a sample of 158 closed-end funds to show that noise-trader sentiment, as proxied by retail-investor flows, leads to fluctuations in the discount. Nevertheless, we reject the hypothesis that noise-trader risk is the cause of the long-run discount. Instead we find...

The paper proposes an intertemporal model of bargaining among heterogeneous buyers and sellers placed on an endogenous bipartite network. First, we characterize those networks whose trading restrictions are non-binding in that the induced outcome is “arbitrage-free,” i.e. all trade is conducted at the same price. Second, we assume that the network is endogenously determined, as captured by the ...

This study is motivated by two major considerations. First, the Fletcher and Taylor (1996) approach has yet to be applied to short-date markets to assess the diminishing role of transaction costs in explaining the deviations of observed forward foreign exchange prices from interest parity forward prices. Second, the role of transaction costs in one-way arbitrage-based interest parity has not be...

Price disparities across locations can occur when sellers in one location have difficulty matching with buyers in a different location due to the transaction costs of trading across distance. Spatial arbitrageurs exploit these discrepancies by buying goods from locations where prices are low and reselling them at locations where prices are high. Electronic channels should lower the transaction ...

The warrant price fluctuated in a range based on the arbitrage-free hypothesis. However, in the actual transaction, the warrant price will deviate the price range because of the investor sentiment, sometimes the deviation is too far that the actual price breaks the lower limit based on the arbitrage-free hypothesis, which make the market some arbitrage opportunities. The buyers’ strength and th...

Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. Equilibrium in financial markets is defined as the absence of arbitrage, i.e. profits “for nothing”. A recently proposed model (by Ilinski et al.) considers fluctuations around this equilibrium state b...

We examine how insiders and firms trade when arbitrage is limited. When arbitrage is costly (proxied by high idiosyncratic risk), insiders and firms earn higher absolute returns on their trades (insider trading, share repurchases, and seasoned equity offerings) in the following year. Furthermore, they initiate their trades following greater past price movements in the preceding year. These resu...

The paper examines automobile price differences in the Single Market for the 1993-98 period. The absolute law of one price is strongly rejected, but there is some convergence to its relative version. Two sets of explanations are considered: (i) price-setting in segmented markets and (ii) arbitrage barriers. The role of price-setting variables is seriously overestimated when arbitrage factors ar...