Limits of Arbitrage

The Limits of Arbitrage Andrei Shleifer; Robert W. Vishny The Journal of Finance, Vol. 52, No. 1. (Mar., 1997), pp. 35-55.

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THE JOURNAL OF FINANCE

VOL. LII, NO. 1

MARCH 1997

The Limits of Arbitrage

ANDRE1 SHLEIFER and ROBERT W. VISHNY* ABSTRACT

Textbook arbitrage in financial markets requires no capital and entails no risk. In reality, almost all arbitrage requires capital, and is typically risky. Moreover, professional arbitrage is conducted by a relatively small number of highly specialized investors using other people's...