Cai, CX, Faff, R and Shin, Y (2018) Noise Momentum Around the World. Abacus, 54 (1). pp. 79-104. ISSN 0001-3072
Abstract
We argue that arbitrageurs will strategically limit their initial investment in an arbitrage opportunity in anticipation of further mispricing caused by the deepening of noise traders' misperceptions. Such ‘noise momentum’ is an important determinant of the overall arbitrage process. We design an empirical strategy to capture noise momentum in a two‐period generalized error correction model. Applying it to a wide range of international spot‐futures market pairs, we document pervasive evidence of noise momentum around the world.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2017 Accounting Foundation, The University of Sydney. This is the peer reviewed version of the following article: Cai, C. X., Faff, R. and Shin, Y. (2018), Noise Momentum Around the World. Abacus, 54: 79-104. doi:10.1111/abac.12101, which has been published in final form at https://doi.org/10.1111/abac.12101. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving. Uploaded in accordance with the publisher's self-archiving policy. |
Keywords: | Futures and spot prices; Initial mispricing correction; Limited arbitrage; Noise momentum |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Accounting & Finance Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 16 Nov 2015 14:51 |
Last Modified: | 20 Mar 2019 01:38 |
Status: | Published |
Publisher: | Wiley |
Identification Number: | 10.1111/abac.12101 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:91861 |