Short selling, unwinding, and mispricing
Journal of Futures Markets, 1998, vol. 18, issue 8, 903-923
This article highlights the impact of short selling restrictions and early unwinding opportunities on the relation between futures and spot prices. Within a multiperiod equilibrium model, the influence of optimal arbitrage trading on the mispricing is analyzed. Results concerning trade volume and level, mean reversion, and path dependence of the mispricing are provided. The empirical evidence suggests that short selling restrictions and early unwinding opportunities are influential factors for the mispricing behavior. They help explain empirical findings reported in the literature. © 1998 John Wiley & Sons, Inc. Jrl Fut Mark 18:903–923, 1998
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:18:y:1998:i:8:p:903-923
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