Financial Fragmentation and Insider Arbitrage

S. Klonner, A.S. Rai

    Research output: Working paperDiscussion paperOther research output

    311 Downloads (Pure)

    Abstract

    If there were no impediments to the flow of capital across space, then the returns to capital should be equalized. We provide evidence to the contrary. There are large di¤erences in the return to comparable investments across different towns in the state of Tamil Nadu in South India. We explore why these di¤erences are not arbitraged away - and suggest that if an insider has monopoly power in arbitraging across towns then it is in his profit-maximizing interest to reduce but not eliminate the differences in returns to capital.
    Original languageEnglish
    Place of PublicationTilburg
    PublisherEBC
    Number of pages40
    Volume2010-09S
    Publication statusPublished - 2010

    Publication series

    NameEBC Discussion Paper
    Volume2010-09S

    Fingerprint

    Arbitrage
    Fragmentation
    Insider
    Impediments
    Monopoly power
    South India
    Profit

    Keywords

    • credit constraints
    • limits to arbitrage

    Cite this

    Klonner, S., & Rai, A. S. (2010). Financial Fragmentation and Insider Arbitrage. (EBC Discussion Paper; Vol. 2010-09S). Tilburg: EBC.
    Klonner, S. ; Rai, A.S. / Financial Fragmentation and Insider Arbitrage. Tilburg : EBC, 2010. (EBC Discussion Paper).
    @techreport{bbce6ca843684952b739f85b501d3d87,
    title = "Financial Fragmentation and Insider Arbitrage",
    abstract = "If there were no impediments to the flow of capital across space, then the returns to capital should be equalized. We provide evidence to the contrary. There are large di¤erences in the return to comparable investments across different towns in the state of Tamil Nadu in South India. We explore why these di¤erences are not arbitraged away - and suggest that if an insider has monopoly power in arbitraging across towns then it is in his profit-maximizing interest to reduce but not eliminate the differences in returns to capital.",
    keywords = "credit constraints, limits to arbitrage",
    author = "S. Klonner and A.S. Rai",
    note = "This is also CentER Discussion Paper 2010-36S",
    year = "2010",
    language = "English",
    volume = "2010-09S",
    series = "EBC Discussion Paper",
    publisher = "EBC",
    type = "WorkingPaper",
    institution = "EBC",

    }

    Klonner, S & Rai, AS 2010 'Financial Fragmentation and Insider Arbitrage' EBC Discussion Paper, vol. 2010-09S, EBC, Tilburg.

    Financial Fragmentation and Insider Arbitrage. / Klonner, S.; Rai, A.S.

    Tilburg : EBC, 2010. (EBC Discussion Paper; Vol. 2010-09S).

    Research output: Working paperDiscussion paperOther research output

    TY - UNPB

    T1 - Financial Fragmentation and Insider Arbitrage

    AU - Klonner, S.

    AU - Rai, A.S.

    N1 - This is also CentER Discussion Paper 2010-36S

    PY - 2010

    Y1 - 2010

    N2 - If there were no impediments to the flow of capital across space, then the returns to capital should be equalized. We provide evidence to the contrary. There are large di¤erences in the return to comparable investments across different towns in the state of Tamil Nadu in South India. We explore why these di¤erences are not arbitraged away - and suggest that if an insider has monopoly power in arbitraging across towns then it is in his profit-maximizing interest to reduce but not eliminate the differences in returns to capital.

    AB - If there were no impediments to the flow of capital across space, then the returns to capital should be equalized. We provide evidence to the contrary. There are large di¤erences in the return to comparable investments across different towns in the state of Tamil Nadu in South India. We explore why these di¤erences are not arbitraged away - and suggest that if an insider has monopoly power in arbitraging across towns then it is in his profit-maximizing interest to reduce but not eliminate the differences in returns to capital.

    KW - credit constraints

    KW - limits to arbitrage

    M3 - Discussion paper

    VL - 2010-09S

    T3 - EBC Discussion Paper

    BT - Financial Fragmentation and Insider Arbitrage

    PB - EBC

    CY - Tilburg

    ER -

    Klonner S, Rai AS. Financial Fragmentation and Insider Arbitrage. Tilburg: EBC. 2010. (EBC Discussion Paper).