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Slow Moving Capital
Abstract
We study three cases in which specialized arbitrageurs lost significant amounts of capital and, as a result, became liquidity demanders rather than providers. The effects on security markets were large and persistent: Prices dropped relative to fundamentals and the rebound took months. While multi-strategy hedge funds who were not capital constrained increased their positions, a large fraction of these funds actually acted as net sellers consistent with the view that information barriers within a firm (not just relative to outside investors) can lead to capital constraints for trading desks with mark-to-market losses. Our findings suggest that real world frictions impede arbitrage capital.
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Citations
Cited by
Presidential Address: Asset Price Dynamics with Slow‐Moving Capital
DUFFIE, D. (2010) · The Journal of Finance · doi:10.1111/j.1540-6261.2010.01569.x · Cited by 854
Menkhoff, L., Sarno, L., Schmeling, M., & Schrimpf, A. (2012) · Journal of Financial Economics · doi:10.1016/j.jfineco.2012.06.009 · Cited by 518
ANTÓN, M., & POLK, C. (2014) · The Journal of Finance · doi:10.1111/jofi.12149 · Cited by 367
Investors' Horizons and the Amplification of Market Shocks
Cella, C., Ellul, A., & Giannetti, M. (2013) · Review of Financial Studies · doi:10.1093/rfs/hht023 · Cited by 330
Metadata
- Authors
- Mitchell, M., Pedersen, L. H., & Pulvino, T.
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2007-04-01
- Volume
- 97
- Issue
- 2
- Pages
- 215-220
- ISSN
- 0002-8282
- OpenAlex
- W3122675873
- Cited by
- 439
- References
- 0
- Type
- journal article
- Language
- en
- Open access
- closed
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- CoChat. (2026). Citation check: Slow Moving Capital. https://app.cochat.ai/papers/10.1257/aer.97.2.215
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- Mitchell, M., Pedersen, L. H., & Pulvino, T. (2007). Slow Moving Capital. American Economic Review. https://doi.org/10.1257/aer.97.2.215
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
