International High-Frequency Arbitrage for Cross-Listed Stocks

58 Pages Posted: 26 Mar 2022

See all articles by Georges Dionne

Georges Dionne

HEC Montreal - Department of Finance

Cédric Poutré

University of Montreal - Department of Mathematics and Statistics

gabriel yergeau

HEC Montréal,

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Abstract

We explore arbitrage activities for cross-listed stocks and develop a methodology to study the effect of information latency in high-frequency trading. The strategy is a hybrid between triangular arbitrage and pairs trading. The strategy can be generalized to multiple cross-listed stocks environments. Market frictions such as trade costs, inventory control, and arbitrage risks are considered. We test the strategy with cross-listed stocks involving three exchanges in Canada and the United States in 2019. The annual net profit with the limit order strategy is around US$6 million. International latency arbitrage with market orders is not profitable with our data.

Keywords: Latency arbitrage, High-Frequency Trading, cross-listed stocks, mean-reverting arbitrage, international arbitrage, supervised machine learning.

Suggested Citation

Dionne, Georges and Poutré, Cédric and yergeau, gabriel, International High-Frequency Arbitrage for Cross-Listed Stocks. Available at SSRN: https://ssrn.com/abstract=4066962 or http://dx.doi.org/10.2139/ssrn.4066962

Georges Dionne (Contact Author)

HEC Montreal - Department of Finance ( email )

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Cédric Poutré

University of Montreal - Department of Mathematics and Statistics ( email )

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Montreal, Quebec H3C 3J7
Canada

HOME PAGE: http://dms.umontreal.ca

Gabriel Yergeau

HEC Montréal,

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