MARC Record from Library of Congress

LEADER: 02141nam a22003017a 4500
001 2011657482
003 DLC
005 20120112173413.0
007 cr |||||||||||
008 120112s2011 mau sb 000 0 eng
010 $a 2011657482
040 $aDLC$cDLC
050 00 $aHB1
100 1 $aEdmans, Alex.
245 10 $aFeedback effects and the limits to arbitrage$h[electronic resource] /$cAlex Edmans, Itay Goldstein, Wei Jiang.
260 $aCambridge, MA :$bNational Bureau of Economic Research,$cc2011.
490 1 $aNBER working paper series ;$vworking paper 17582
538 $aSystem requirements: Adobe Acrobat Reader.
538 $aMode of access: World Wide Web.
500 $aTitle from PDF file as viewed on 1/12/2012.
530 $aAlso available in print.
504 $aIncludes bibliographical references.
520 3 $a"This paper identifies a limit to arbitrage that arises from the fact that a firm's fundamental value is endogenous to the act of exploiting the arbitrage. Trading on private information reveals this information to managers and helps them improve their real decisions, in turn enhancing fundamental value. While this increases the profitability of a long position, it reduces the profitability of a short position -- selling on negative information reveals that firm prospects are poor, causing the manager to cancel investment. Optimal abandonment increases firm value and may cause the speculator to realize a loss on her initial sale. Thus, investors may strategically refrain from trading on negative information, and so bad news is incorporated more slowly into prices than good news. The effect has potentially important real consequences -- if negative information is not incorporated into stock prices, negative-NPV projects may not be abandoned, leading to overinvestment"--National Bureau of Economic Research web site.
700 1 $aGoldstein, Itay.
700 1 $aJiang, Wei.
710 2 $aNational Bureau of Economic Research.
830 0 $aWorking paper series (National Bureau of Economic Research : Online) ;$vworking paper no. 17582.
856 40 $uhttp://www.nber.org/papers/w17582