The proof is in the pudding: Arbitrage is possible in limited emerging markets

M. Ansotegui Olcoz; Aliaa Bassiouny; Eskandar Tooma

doi:10.1016/j.intfin.2012.11.001

The proof is in the pudding: Arbitrage is possible in limited emerging markets

M. Ansotegui Olcoz
, Aliaa Bassiouny^*
, Eskandar Tooma

^*Autor/a de correspondencia de este trabajo

Producción científica: Artículo en revista indizada › Artículo › revisión exhaustiva

14 Citas (Scopus)

Resumen

We investigate whether arbitrage trades exist in emerging markets with trading barriers. Using two-year intraday data for 16 Argentinean and Egyptian depository receipts and their underlying stock, we find large intraday deviations from parity. We extend the standard arbitrage identification procedure to account for volumes and precise dynamic measures of trading costs, resulting in 9.81% and 15.32% of Argentinean and Egyptian matched trades identified as arbitrage opportunities, which we show, result in real profitable arbitrage trades. Arbitrage profits of USD 1.8 million from Argentinean and USD 1.2 million from Egyptian depository receipts were estimated over the sample period.

Idioma original	Inglés
Páginas (desde-hasta)	342-357
Número de páginas	16
Publicación	Journal of International Financial Markets, Institutions and Money
Volumen	23
N.º	1
DOI	https://doi.org/10.1016/j.intfin.2012.11.001
Estado	Publicada - feb 2013
Publicado de forma externa	Sí

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title = "The proof is in the pudding: Arbitrage is possible in limited emerging markets",

abstract = "We investigate whether arbitrage trades exist in emerging markets with trading barriers. Using two-year intraday data for 16 Argentinean and Egyptian depository receipts and their underlying stock, we find large intraday deviations from parity. We extend the standard arbitrage identification procedure to account for volumes and precise dynamic measures of trading costs, resulting in 9.81\% and 15.32\% of Argentinean and Egyptian matched trades identified as arbitrage opportunities, which we show, result in real profitable arbitrage trades. Arbitrage profits of USD 1.8 million from Argentinean and USD 1.2 million from Egyptian depository receipts were estimated over the sample period.",

keywords = "Arbitrage, Depository receipts, Emerging markets, Multi-market trading, Transaction costs",

author = "\{Ansotegui Olcoz\}, M. and Aliaa Bassiouny and Eskandar Tooma",

note = "Funding Information: Carmen Ansotegui holds a degree in Business Administration from Universidad de Zaragoza, a Master in Economic Theory and a PhD in Financial Economics from University of Pennsylvania. She has been lecturer at the Department of Finance Management and Control of ESADE, undertaking research and teaching activities. Her areas of interest include stock market pricing patterns, derivatives, valuation and their use for market risk management and credit risk. Current research activities focus on credit risk, mainly the project Merito, financed by the Spanish Ministry of Technology. ",

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N1 - Funding Information: Carmen Ansotegui holds a degree in Business Administration from Universidad de Zaragoza, a Master in Economic Theory and a PhD in Financial Economics from University of Pennsylvania. She has been lecturer at the Department of Finance Management and Control of ESADE, undertaking research and teaching activities. Her areas of interest include stock market pricing patterns, derivatives, valuation and their use for market risk management and credit risk. Current research activities focus on credit risk, mainly the project Merito, financed by the Spanish Ministry of Technology.

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N2 - We investigate whether arbitrage trades exist in emerging markets with trading barriers. Using two-year intraday data for 16 Argentinean and Egyptian depository receipts and their underlying stock, we find large intraday deviations from parity. We extend the standard arbitrage identification procedure to account for volumes and precise dynamic measures of trading costs, resulting in 9.81% and 15.32% of Argentinean and Egyptian matched trades identified as arbitrage opportunities, which we show, result in real profitable arbitrage trades. Arbitrage profits of USD 1.8 million from Argentinean and USD 1.2 million from Egyptian depository receipts were estimated over the sample period.

AB - We investigate whether arbitrage trades exist in emerging markets with trading barriers. Using two-year intraday data for 16 Argentinean and Egyptian depository receipts and their underlying stock, we find large intraday deviations from parity. We extend the standard arbitrage identification procedure to account for volumes and precise dynamic measures of trading costs, resulting in 9.81% and 15.32% of Argentinean and Egyptian matched trades identified as arbitrage opportunities, which we show, result in real profitable arbitrage trades. Arbitrage profits of USD 1.8 million from Argentinean and USD 1.2 million from Egyptian depository receipts were estimated over the sample period.

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KW - Depository receipts

KW - Emerging markets

KW - Multi-market trading

KW - Transaction costs

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The proof is in the pudding: Arbitrage is possible in limited emerging markets

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