Download This PaperMulti-Market Trading and Arbitrage
53 Pages Posted: 17 Aug 2004 Last revised: 12 Jul 2010
Date Written: June 17, 2004
Abstract
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: Suggested Citation
Louis Joseph Gagnon (Contact Author)
Queen's University - Smith School of Business ( email )
Kingston, Ontario K7L 3N6
Canada
613-533-6707 (Phone)
613-533-2321 (Fax)
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