TY - JOUR
T1 - Limits to arbitrage and the MAX anomaly in advanced emerging markets
AU - Seif, Mostafa
AU - Docherty, Paul
AU - Shamsuddin, Abul
PY - 2018/9
Y1 - 2018/9
N2 - Evidence of a negative relationship between extreme positive returns and future returns has been reported in developed markets (Bali, Cakici, & Whitelaw, 2011; Zhong & Gray, 2016). This study examines this “MAX anomaly” across advanced emerging markets, which are characterised by a higher level of limits to arbitrage compared with developed markets, but lower financial frictions than their secondary emerging counterparts. The MAX anomaly is shown to be larger in magnitude in advanced emerging markets compared with developed markets. Our results support the proposition that the MAX anomaly is a pervasive anomaly that is related to mispricing.
AB - Evidence of a negative relationship between extreme positive returns and future returns has been reported in developed markets (Bali, Cakici, & Whitelaw, 2011; Zhong & Gray, 2016). This study examines this “MAX anomaly” across advanced emerging markets, which are characterised by a higher level of limits to arbitrage compared with developed markets, but lower financial frictions than their secondary emerging counterparts. The MAX anomaly is shown to be larger in magnitude in advanced emerging markets compared with developed markets. Our results support the proposition that the MAX anomaly is a pervasive anomaly that is related to mispricing.
KW - Emerging markets
KW - Limits of arbitrage
KW - MAX anomaly
KW - Mispricing
UR - http://www.scopus.com/inward/record.url?scp=85045220001&partnerID=8YFLogxK
U2 - 10.1016/j.ememar.2018.03.004
DO - 10.1016/j.ememar.2018.03.004
M3 - Article
AN - SCOPUS:85045220001
SN - 1566-0141
VL - 36
SP - 95
EP - 109
JO - Emerging Markets Review
JF - Emerging Markets Review
ER -