We propose to investigate the mispricing and limits to arbitrage of emerging market firms listed in the stock exchanges of developed markets. Using the setting of short arbitrageurs (short arbs ), we will investigate how the characteristics of targets' headquarters and listing countries affect the success of short arbs' campaigns. Increasing global financial integration has led short arbs to expand their targets to various countries. Anecdotally, their stellar performance in foreign targets, especially those in emerging economies, has elicited considerable attention from the financial press. Still, most research focuses exclusively on US short campaigns, and whether short arbs are generally accurate or manipulate stock prices for profit remains a source of debate. Using short arbs' locations and their targets' headquarters and listing locations, we aim to provide insight into the sources of firm overvaluation in the global financial market and the magnitude of arbitrageurs' constraints.
Principal Investigator (PI): Allen Huang, Department of Accounting; Emily Wang, Department of Accounting
This project is funded by the HKUST IEMS Research Grants 2021.
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