VGSF Finance Research Seminar

Location: WU (Vienna University of Economics and Business) , Departments 3 3.0.225 on 11 October 2019 Starting at 11:00 Ending at 12:30
Type Lecture / discussion
LanguageEnglisch
Speaker Joel Peress (INSEAD)
Organizer WU (Vienna University of Economics and Business) Slow Arbitrage: Fund Flows and Mispricing in the Frequency Domain
Contact office@vgsf.ac.at

The FRS informs about state-of-the-art research in Finance.

We conduct a spectral analysis of the relation between capital flows and mispricing. Hedge funds and mutual funds both behave as low-pass filters, deploying high-frequency flows towards lowfrequency mispricing. But hedge funds attenuate high-frequency flows more than mutual funds do, thus improving market efficiency 2 to 7 times more slowly than mutual funds worsen it. Timeseries and cross-sectional tests indicate that risk, limited access to capital, and implementation costs are the reasons hedge funds behave as low-pass filters. Our results highlight the differential effect of arbitrage capital on market efficiency across frequencies.



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