Limits-to-arbitrage in the Australian Equity Market

Shleifer and Vishny (1997) and Pontiff (2006) contend that limits-to-arbitrage prevent investors from correcting mispricing, thereby allowing well-known stock market anomalies to persist. While there is a respectable body of literature on Australian stock market anomalies, the influence of limits-to-arbitrage remains largely unexplored. As such, this thesis conducts a comprehensive study of the role played by arbitrage costs for a variety of Australian stock market anomalies. In addition, this thesis also examines how different types of arbitrage costs affect a selection of prominent anomalies (size, book-to-market, gross profitability, asset growth, momentum, MAX, beta and total volatility).