Anomalies

Lamont, O. A., & Thaler, R. H. (2003). Anomalies: The Law of One Price in Financial Markets. Journal of Economic Perspectives, 17(4), 191-202.

Type

Journal article

Intellectual base

Primary research

Year

2003

Volume

17

Issue

4

Pages

191-202

DOI

10.1257/089533003772034952

DOI registrant

American Economic Association

Link

https://doi.org/10.1257/089533003772034952

Cited from

biology_ecology, economics_finance

Cited by

2 citations across 2 artifacts.

Each citation links to the sentence it supports in the citing article.

Primes

• Arbitrage (Finance)
  • … in $50/BTC profit—a textbook violation of what Lamont and Thaler (2003) call the Law of One Price, whose persistent violations (the 3Com/Palm carve-out, "Siamese-twin" share pairs, closed-end fund discounts) demonstrate that even highly liquid markets can sustain large gaps between identical or near-identical claims.

    This sourceSurveys persistent violations of the Law of One Price in equity markets (3Com/Palm carve-out, twin/'Siamese-twin' shares, dual-class shares, closed-end funds, corporate spinoffs), all stemming from limits on rational-arbitrageur intervention—showing even highly liquid markets can sustain large gaps between identical or near-identical claims.

    Supported in partVerified against the publisher's abstract

    Abstract confirms Lamont & Thaler document Law of One Price violations (twin shares, closed-end funds, spinoffs) from limits on arbitrage; it names no 3Com/Palm case.

    “We present evidence on several examples of violations of this law, including closed-end country funds, twin shares, dual class shares, and corporate spinoffs. We analyze the causes of these violations, and show they all stem from some limits on the extent to which rational arbitrageurs can intervene.”

    Read by an automated reader; not a human review. How support was checked

• Cross-Boundary Subsidy
  • The pairing with arbitrage is itself a transferable diagnostic — when a sustained cross-boundary flow is observed, the analyst asks whether it is closing a spread (arbitrage, where convergence is the expectation but not a guarantee)

Verification

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