Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March 9, 2020 erstellt
Description:
Conventional wisdom suggests underpricing of synthetic stocks due to short-sale constraints and voting premiums. This study finds that such underpricing of mid quote point disappears once arbitrageurs face security borrowing costs. Rather, synthetic bid and ask prices predominantly contain actual bid and ask indicating that price takers face worse prices in the synthetic stock market regardless of the trade direction. Arbitrage opportunities with over priced synthetic stock is as likely as those with under priced synthetic stock but the former arbitrage opportunities are more persistent and more profitable. The difference between synthetic and actual price quotes is significantly affected by options market makers' hedging costs and investors' demand for leverage while adverse selection plays a limited role