Abstract

http://ssrn.com/abstract=1338885
 
 

References (40)



 
 

Citations (4)



 


 



Mispricing of Dual-Class Shares: Profit Opportunities, Arbitrage, and Trading


Paul H. Schultz


University of Notre Dame - Department of Finance

Sophie Shive


University of Notre Dame - Department of Finance

October 29, 2009

EFA 2009 Bergen Meetings Paper

Abstract:     
This is the first paper to examine the microstructure of how mispricing is created and resolved. We study dual class-shares with equal cash-flow rights, and show that a simple trading strategy exploiting gaps between their prices appears to create abnormal profits after transactions costs. Trade data from TAQ shows that investors shift their trading patterns to take advantage of gaps. Contrary to common perception, long-short arbitrage plays a minor part in eliminating gaps, and one-sided trades correct most of them. We also show that the more liquid share class is usually responsible for the price discrepancies. Our findings have implications for the literature on risky arbitrage and asset pricing more generally.

Number of Pages in PDF File: 60

Keywords: Dual-class shares, arbitrage, mispricing

JEL Classification: G12,G14

working papers series


Download This Paper

Date posted: February 6, 2009 ; Last revised: November 2, 2009

Suggested Citation

Schultz, Paul H. and Shive, Sophie, Mispricing of Dual-Class Shares: Profit Opportunities, Arbitrage, and Trading (October 29, 2009). EFA 2009 Bergen Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1338885 or http://dx.doi.org/10.2139/ssrn.1338885

Contact Information

Paul H. Schultz
University of Notre Dame - Department of Finance ( email )
P.O. Box 399
Notre Dame, IN 46556-0399
United States
219-631-3338 (Phone)
219-631-5255 (Fax)
Sophie Shive (Contact Author)
University of Notre Dame - Department of Finance ( email )
P.O. Box 399
Notre Dame, IN 46556-0399
United States
Feedback to SSRN


Paper statistics
Abstract Views: 4,255
Downloads: 1,506
Download Rank: 5,712
References:  40
Citations:  4

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.297 seconds