Multi-Market Trading and Arbitrage

53 Pages Posted: 17 Aug 2004 Last revised: 12 Jul 2010

See all articles by Louis Gagnon

Louis Gagnon

Queen's University - Smith School of Business

George Andrew Karolyi

Cornell University - SC Johnson College of Business

Date Written: June 17, 2004


We measure arbitrage opportunities by comparing the intraday prices and quotes of American Depositary Receipts (ADRs) and other types of cross-listed shares in U.S. markets with synchronous prices of their home-market shares on a currency-adjusted basis for a sample of 506 U.S. cross-listed stocks from 35 different countries. Deviations from price parity average an economically small 4.9 basis points, but they are volatile and can reach large extremes. Price parity deviations and their daily changes are positively related to proxies for holding costs that can impede arbitrage, even after controlling for transactions costs and foreign investment restrictions.

Keywords: International finance, multi-market trading, cross-listed stocks, arbitrage

JEL Classification: F30, G32, G15

Suggested Citation

Gagnon, Louis Joseph and Karolyi, George Andrew, Multi-Market Trading and Arbitrage (June 17, 2004). Journal of Financial Economics (JFE), Vol. 97, No. 1, July 2010, Available at SSRN:

Louis Joseph Gagnon (Contact Author)

Queen's University - Smith School of Business ( email )

Kingston, Ontario K7L 3N6
613-533-6707 (Phone)
613-533-2321 (Fax)

George Andrew Karolyi

Cornell University - SC Johnson College of Business ( email )

ITHACA, NY 14853
United States
6142820229 (Phone)

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