The Limits of Arbitrage

@article{Shleifer1995TheLO,
  title={The Limits of Arbitrage},
  author={Andrei Shleifer and Robert W. Vishny},
  journal={NBER Working Paper Series},
  year={1995}
}
In traditional models, arbitrage in a given security is performed by a large number of diversified investors taking small positions against its mispricing. In reality, however, arbitrage is conducted by a relatively small number of highly specialized investors who take large positions using other people's money. Such professional arbitrage has a number of interesting implications for security pricing, including the possibility that arbitrage becomes ineffective in extreme circumstances, when… 
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