TY  - JOUR
AU  - Lamont,Owen A.
AU  - Thaler,Richard H.
TI  - Can the Market Add and Subtract? Mispricing in Tech Stock Carve-Outs
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8302
PY  - 2001
Y2  - May 2001
UR  - http://www.nber.org/papers/w8302
L1  - http://www.nber.org/papers/w8302.pdf
N1  - Author contact info:
Owen Lamont
Department of Economics
Harvard University
Cambridge MA 02138
E-Mail: owen.lamont@yale.edu

Richard H. Thaler
Booth School of Business
University of Chicago
5807 South Woodlawn Ave
Chicago, IL 60637
Tel: 773/702-5208
Fax: 773/834-9134
E-Mail: richard.thaler@chicagobooth.edu
AB  - Recent equity carve-outs in US technology stocks appear to violate a basic premise of financial theory: identical assets have identical prices. In our 1998-2000 sample, holders of a share of company A are expected to receive x shares of company B, but the price of A is less than x times the price of B. A prominent example involves 3Com and Palm. Arbitrage does not eliminate these blatant mispricing due to short sale constraints, so that B is overpriced but expensive or impossible to sell short. Evidence from options prices shows that shorting costs are extremely high, eliminating exploitable arbitrage opportunities.
ER  -