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How quickly is temporary market inefficiency removed?

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  • Marshall, Ben R.
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    Abstract

    I provide evidence on the length of time it takes for arbitrageurs to exploit attractive investment opportunities. A unique data set from the Internet sports betting market allows me to focus on the speed of investor response in an environment that is not affected by the joint hypothesis problem. The market does not instantly converge to an efficient level after mispricing occurs, but the adjustment process is rapid. Arbitrageurs remove many of these opportunities within minutes of them being created and the majority are gone within an hour. Arbitrage opportunities that are more difficult to find last for longer.

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    File URL: http://www.sciencedirect.com/science/article/B6W5X-4W4TY4T-3/2/5038dc71f2dd44f9aa8675a1781a6dd4
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    Bibliographic Info

    Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

    Volume (Year): 49 (2009)
    Issue (Month): 3 (August)
    Pages: 917-930

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    Handle: RePEc:eee:quaeco:v:49:y:2009:i:3:p:917-930

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    Web page: http://www.elsevier.com/locate/inca/620167

    Related research

    Keywords: Arbitrage Market efficiency Behavioral finance;

    References

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    Cited by:
    1. Alasdair Brown, 2013. "Information Acquisition in Ostensibly Efficient Markets," University of East Anglia Applied and Financial Economics Working Paper Series 043, School of Economics, University of East Anglia, Norwich, UK..
    2. Masahiro Ashiya, 2013. "Lock! Risk-Free Arbitrage in the Japanese Racetrack Betting Market," Discussion Papers 1301, Graduate School of Economics, Kobe University.
    3. Colantonio Emiliano, 2013. "Betting Markets: Opportunities For Many?," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 200-208, December.

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