Review of Financial Studies Vol. 31 No. 2 2018
Open-End Organizational Structures and Limits to Arbitrage
Abstract
We provide evidence that open-end organizational structures undermine incentives for asset managers to attack long-term mispricing. We compare open-end funds with closed-end funds. Closed-end funds purchase more underpriced stocks than do open-end funds, especially if the stocks involve high arbitrage risk. We then show that hedge funds with highshare restrictions having a lower degree of open-endedness also trade against long-term mispricing to a larger extentthan do other hedge funds. Our analysis suggests that open-end organizational structures are not conducive to long-term risky arbitrage. Received November 4, 2015; editorial decision March 10, 2017 by Editor Andrew Karolyi.
- DOI
- 10.1093/rfs/hhx057
- Volume
- 31
- Issue
- 2
- Pages
- 773-810
- Language
- en
- Sources
- openalex crossref