Journal of Finance and Accountancy Limited arbitrage, Page 1 Limited arbitrage: the South African evidence

One of the cornerstones of Financial Theory is that arbitrage will eliminate any excess profit opportunities. Over the past decade anomalous empirical evidence has been showing up, the return patterns of which do not fit this prediction. Most anomalies self-destruct, but the value premium (i.e., higher share price returns for companies trading at low prices to fundamentals) has been a stubborn anomaly. This study tests for the existence of the value premium in South Africa’s equity market and interpret the results in terms of its implication for arbitrage and our understanding of it as a cornerstone of financial markets