TY  - JOUR
AU  - Mitchell,Mark
AU  - Pedersen,Lasse Heje
AU  - Pulvino,Todd
TI  - Slow Moving Capital
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12877
PY  - 2007
Y2  - January 2007
UR  - http://www.nber.org/papers/w12877
L1  - http://www.nber.org/papers/w12877.pdf
N1  - Author contact info:
Mark Mitchell
Graduate School of Business Administration
Harvard University
Morgan Hall 125
Boston, MA 02163
Tel: 617/495-1014
E-Mail: mmitchell@cnhpartners.com

Lasse H. Pedersen
NYU Stern Finance
44 West Fourth Street
Suite 9-190
New York, NY 10012
Tel: 212/998-0359
Fax: 212/995-4233
E-Mail: lpederse@stern.nyu.edu

Todd Pulvino
CNH Partners
2 Greenwich Plaza, 1st Floor
Greenwich, CT 06830
Tel: 203/742-3002
E-Mail: tpulvino@cnhpartners.com
AB  - 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.
ER  -