Funding Constraints and Market Efficiency
Wednesday, February 8th, 2012
Avanidhar Subrahmanyam, Ph.D.
Goldyne and Irwin Hearsh Chair in Money and Banking, Anderson School of Business, UCLA
Chair: Richard Peterson
This event is sponsored by the Applied Behavioral Finance Group (ABFG). The mission of ABFG Los Angeles is "To identify, evaluate, and disseminate information and activities in the field of behavioral finance. Our objective is to enhance collaboration between research and practitioners in order to produce practical applications of value for investors and professionals who serve them."
We explore the premise that the degree of market efficiency changes dynamically as investment funds face time-varying funding constraints to arbitrage capital. We show that the returns to a composite long-short hedge strategy that encompasses relative value, momentum, short-run reversals, and accounting profitability, are higher when past returns to the strategy are low, and past volatility is high, which is when fund managers are particularly likely to be impeded in attracting funds. Furthermore, returns to the strategy also are higher when there are net outflows from funds that load heavily on the returns to the composite strategy. Our results support the notion that the efficiency of stock pricing is not a static concept but varies across time as agents face time varying constraints on arbitrage capital.
Time: 12:00 pm - 1:30 pm, Lunch
Location: Millennium Biltmore Hotel Los Angeles
506 South Grand Avenue
Los Angeles, CA 90071-2607
Parking: Hotel Valet Parking: $20.00
Self-Parking at AT&T Center (611 S. Grand Ave., Los Angeles, CA 90071 -
Driveway just South of Hilton's Checkers Hotel): $9.35
Dress Code: Business Casual
Methods of payment accepted: Visa/Mastercard, American Express and Discover. If you prefer to pay by check please register online and select "purchase order" as your payment option and enter your last name as the purchase order number. Mail check to: CFA Society of Los Angeles, 520 S. Grand Ave, Suite 370, Los Angeles CA 90071.
*Credit card payments will only be accepted through the secure online registration, and not by phone or email.