Price Adjustment Delays and Arbitrage Costs: Evidence from the Behavior of Convertible Preferred Prices

Ji-chai Lin, Michael S. Rozeff

Research output: Journal article publicationJournal articleAcademic researchpeer-review

3 Citations (Scopus)


Price adjustment delays occur between in-the-money convertible preferred stock prices and common stock prices. Convertible preferred prices systematically deviate from the prices predicted from their conversion relations with common stocks. The price predictability stems from price changes in the underlying common stocks leading the price changes in the convertible preferred stocks by up to nine hours. Cross-sectionally, about 70 percent of the variation in the unsigned size of the price deviations is explained by proxies for costs of arbitrage.
Original languageEnglish
Pages (from-to)61-80
Number of pages20
JournalJournal of Financial and Quantitative Analysis
Issue number1
Publication statusPublished - 1 Jan 1995
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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