<p>The seminal paper in this area with over 3,000 citations is by Shleifer and Vishney:</p>

<blockquote>
  <p>Textbook arbitrage in financial markets requires no capital and
  entails no risk. In reality, almost all arbitrage requires capital,
  and is typically risky. Moreover, professional arbitrage is conducted
  by a relatively small number of highly specialized investors using
  other people's capital. Such professional arbitrage has a number of
  interesting implications for security pricing, including the
  possibility that arbitrage becomes ineffective in extreme
  circumstances, when prices diverge far from fundamental values. The
  model also suggests where anomalies in financial markets are likely to
  appear, and why arbitrage fails to eliminate them.</p>
</blockquote>

<p>The Limits of Arbitrage (<a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6261.1997.tb03807.x/full">Andrei Shleifer and Robert W. Vishny (1997)</a>) </p>

<p><a href="http://scholar.google.com/scholar?cluster=12337463257772968513&amp;hl=en&amp;as_sdt=0,9">There are many versions online</a>, one of them is likely ungated.</p>

CC BY-SA 3.0
2015-03-25T16:56:20.990Z
2015-03-25T16:56:20.990Z
BKay
<p>There are two necessary conditions for such a price discrimination :
 1. The markets should be isolated
 2. Some sort of price making power should be involved i.e. some degree of    imperfection is required.</p>

CC BY-SA 3.0
2016-04-29T11:29:51.123Z
2016-04-29T11:29:51.123Z
Sub-Optimal
<p>What could prevent arbitrage (not necessarily risk-free) between some markets even when price differences exist?</p>

<finance><efficient-markets><financial-markets>
What possible reasons could make arbitrage impossible between some markets?
absento
# What possible reasons could make arbitrage impossible between some markets?

(Asked by: username_0 on 2015-03-25)

What could prevent arbitrage (not necessarily risk-free) between some markets even when price differences exist?

**Tags:** finance, efficient-markets, financial-markets

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## 2 answers

### Answer by username_1 on 2015-03-25. Score: 6

The seminal paper in this area with over 3,000 citations is by Shleifer and Vishney:

> Textbook arbitrage in financial markets requires no capital and
> entails no risk. In reality, almost all arbitrage requires capital,
> and is typically risky. Moreover, professional arbitrage is conducted
> by a relatively small number of highly specialized investors using
> other people's capital. Such professional arbitrage has a number of
> interesting implications for security pricing, including the
> possibility that arbitrage becomes ineffective in extreme
> circumstances, when prices diverge far from fundamental values. The
> model also suggests where anomalies in financial markets are likely to
> appear, and why arbitrage fails to eliminate them.

The Limits of Arbitrage ([Andrei Shleifer and Robert W. Vishny (1997)](http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6261.1997.tb03807.x/full))

[There are many versions online](http://scholar.google.com/scholar?cluster=12337463257772968513&hl=en&as_sdt=0,9), one of them is likely ungated.


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### Answer by username_2 on 2016-04-29. Score: -1

There are two necessary conditions for such a price discrimination :
1. The markets should be isolated
2. Some sort of price making power should be involved i.e. some degree of imperfection is required.


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