Ownership structure, limits to arbitrage, and stock returns: evidence from equity lending markets

Melissa Porras Prado, Pedro A.C. Saffi, Jason Sturgess

Research output: Contribution to journalArticle

18 Citations (Scopus)

Abstract

We examine how institutional ownership structure gives rise to limits to arbitrage through its impact on short-sale constraints. Stocks with lower, more concentrated, short-term, and less passive ownership exhibit lower lending supply, higher costs of shorting, and higher arbitrage risk. These constraints limit the ability of arbitrageurs to take short positions and delay the correction of mispricing. Stocks with more concentrated ownership exhibit smaller announcement day reactions, larger post-earnings announcement drift, and an additional negative abnormal return of -0.47% in the week following a positive shorting demand shock.

Original languageEnglish
Pages (from-to)3211-3244
Number of pages34
JournalReview Of Financial Studies
Volume29
Issue number12
DOIs
Publication statusPublished - 1 Jan 2016

Fingerprint Dive into the research topics of 'Ownership structure, limits to arbitrage, and stock returns: evidence from equity lending markets'. Together they form a unique fingerprint.

Cite this