Market Efficiency and Arbitrage Opportunities for Russian Depositary Receipts Cross-Listed on the London Stock Exchange

2016 ◽  
Vol 19 (02) ◽  
pp. 1650007 ◽  
Author(s):  
Oksana Kim
Keyword(s):  
Market Efficiency ◽  
Stock Exchange ◽  
Local Market ◽  
London Stock Exchange ◽  
Arbitrage Opportunities ◽  
Individual Traders ◽  
Arbitrage Opportunity ◽  
Depositary Receipts ◽  
Differential Expectations ◽  
Russian Stock Market

This study examines the Russian stock market efficiency from two perspectives. First, we document that for the sample of Russian firms cross-listed on the Main Market of the London Stock Exchange (LSE) as Global Depositary Receipts (GDRs), the return series obtained from both the local market and the LSE are time-invariant and hence, predictable. This suggests that the market is inefficient with respect to pricing Russian GDRs and that investors are likely to make systematic nonzero profits. Second, we document profitable arbitrage opportunity surrounding the announcement to adopt IFRS, which is an additional evidence of market inefficiency. The significant pricing spread observed on this key date was due to the differential market reaction to IFRS adoption — neutral on the local MICEX exchange dominated by individual traders and significantly negative on the LSE dominated by institutional investors. This finding can be explained by (i) informational advantages of the local investors due to geographic proximity, (ii) differential expectations with respect to governance norms and listing requirements, and (iii) difference in portfolio composition of the two investor groups.

scholarly journals Order Imbalances and Market Efficiency: Evidence from the Taiwan Stock Exchange

2004 ◽  
Vol 39 (2) ◽  
pp. 327-341 ◽  
Author(s):  
Yi-Tsung Lee ◽  
Yu-Jane Liu ◽  
Richard Roll ◽  
Avanidhar Subrahmanyam
Keyword(s):  
Market Efficiency ◽  
Stock Exchange ◽  
Large Individual ◽  
Domestic Institutions ◽  
Market Making ◽  
Taiwan Stock Exchange ◽  
Market Makers ◽  
Order Imbalance ◽  
Individual Traders ◽  
Over Time

AbstractData from the Taiwan Stock Exchange identify the originator of each submitted order, and there are no designated dealers or specialists. We study marketable order imbalances, i.e., the net order flow resulting from trades that demand immediacy. We distinguish imbalances by trader type (individuals, domestic institutions, foreign institutions) and by the usual size of each trader's order. Day-to-day persistence in order imbalance is strongest for small foreign institutions and weakest for large individual traders. Such persistence emanates both from splitting orders over time and from herding, and there is little evidence that aggregate price pressures from such persistence last beyond a trading day, indicating that de facto market making is quite effective. We attempt to discern which types of traders are de facto liquidity providers, which are likely to be informed, and which trade for liquidity reasons. The evidence indicates that all trader classes are successful market makers, large domestic institutions conduct the most informed trades, and large individuals are noise or liquidity traders.

scholarly journals Profits From Buying Losers And Selling Winners In The London Stock Exchange

2011 ◽  
Vol 1 (11) ◽  
Author(s):  
Antonios Antoniou ◽  
Emilios C. Galariotis ◽  
Spyros I. Spyrou
Keyword(s):  
Market Efficiency ◽  
Stock Returns ◽  
Stock Exchange ◽  
London Stock Exchange ◽  
Stock Portfolios ◽  
Contrarian Strategies ◽  
Subsequent Period ◽  
Investor Optimism ◽  
Investor Behaviour ◽  
Market Capitalisation

<p>DeBondt and Thaler (1985) have challenged the notions of market efficiency and of rational investor behaviour. According to their findings stock portfolios that experience negative returns tend to outperform portfolios that experience positive returns, during the subsequent period. In other words, stock returns may be predictable, and this may be due to excessive investor optimism and pessimism. This paper investigates the existence of such contrarian profits for stocks listed in the London Stock Exchange. The results indicate that contrarian strategies are profitable for UK stocks and more pronounced for extreme market capitalisation stocks. These profits persist even after the sample is adjusted for market frictions, and irrespective of whether raw or risk-adjusted returns are used.</p>

An Empirical Analysis of the Arbitrage Opportunities in the KOSPI200 Futures and Options Markets

2004 ◽  
Vol 12 (2) ◽  
pp. 45-71
Author(s):  
Kee Hong Bae ◽  
Su Jae Chang ◽  
Jin Wan Cho
Keyword(s):  
Futures Markets ◽  
Primary Source ◽  
Options Markets ◽  
Transaction Data ◽  
Transactions Cost ◽  
Bid Ask Spread ◽  
Arbitrage Opportunities ◽  
Individual Traders ◽  
Arbitrage Opportunity ◽  
The Individual

We investigate the frequency of arbitrage opportunities and the size of their profits in the options and futures markets of KOSPI200 index. A thread of existing studies shows that these opportunities arise frequently, albeit the frequency is decreasing as the market matures. These studies, however, use transaction data in their analysis. Using the transaction data tends to overestimate both the frequency and the size of arbitrage gains, since it ignores the transactions cost imbedded in the bid-ask spread. In this study, we use the quote data to correctly reflect the transactions cost in executing the trades to take advantage of an arbitrage opportunity. By using the data spanning the period from Sep. 3, 2001 to Mar. 29. 2002, we show that both the frequency and size of arbitrage gains are much smaller than those when transaction data are used instead of Quote data. We also find that the Individual traders are the primary source that provide the arbitrage opportunities.

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