No. 2018-13 - Arbitrage, Information, and the Competitive Organization of Distributions of Profitability

Date: 27 September 2018

This paper presents evidence that large-sample, cross-sectional distributions of the rate of return on capital (RoC) realized by enterprises across twenty European economies exhibit the same functional form: Double-stretched-exponential distributions. To account for this obser- vation, the paper develops a systemic, economic model of the macroscopic outcomes of the competitive actions of arbitrageurs—who seek profits defined by heterogeneity across values of RoC. The model suggests the observed distributions embody competitively established aggregate tradeoffs between the pecuniary returns and costs arbitrageurs incur. Those costs can be taken as ...

Paulo L. dos Santos Jangho Yang

Complexity Economics

No. 2018-13 - Arbitrage, Information, and the Competitive Organization of Distributions of Profitability


Type: inet-working-paper

dos Santos, P.L. and Yang, J. (2018). 'Arbitrage, Information, and the Competitive Organization of Distributions of Profitability'. INET Oxford Working Paper No. 2018-13


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