The Law of One Price and Arbitrage on China's Dual-listings
Traditionally, arbitrage refers to simultaneously buying and selling the same financial assets by taking advantage of a price difference in two or more markets. However, the strict sense of arbitrage is hardly obtained after consideration the issues concerning transaction costs and time value of...
| Main Authors: | , |
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| Format: | Journal Article |
| Published: |
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2013
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| Online Access: | http://epublications.bond.edu.au/ijbf/vol9/iss2/4 http://hdl.handle.net/20.500.11937/27866 |
| _version_ | 1848752382704353280 |
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| author | Liu, Li Xian Bogomolov, T. |
| author_facet | Liu, Li Xian Bogomolov, T. |
| author_sort | Liu, Li Xian |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | Traditionally, arbitrage refers to simultaneously buying and selling the same financial assets by taking advantage of a price difference in two or more markets. However, the strict sense of arbitrage is hardly obtained after consideration the issues concerning transaction costs and time value of money. By using the identical assets such as Chinese ADRs and their underlying securities traded in different markets in Hong Kong in HK dollar and in New York in US dollar and by constructing a very simple arbitrage trading strategy, this study demonstrates that arbitrage profits are still available with monthly return ranging from 0.5 per cent to 3.8 per cent after considering transaction costs and non-overlap trading time issues. This is a new study to verify this behaviour of an emerging market’s ADRs traded in two financial market locations, so adding evidence of inefficiency in trading of China-listed stocks in foreign locations. |
| first_indexed | 2025-11-14T08:07:44Z |
| format | Journal Article |
| id | curtin-20.500.11937-27866 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T08:07:44Z |
| publishDate | 2013 |
| publisher | ?? |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-278662017-01-30T13:01:41Z The Law of One Price and Arbitrage on China's Dual-listings Liu, Li Xian Bogomolov, T. Trading strategy Arbitrage ADRs Transaction costs Financial markets Traditionally, arbitrage refers to simultaneously buying and selling the same financial assets by taking advantage of a price difference in two or more markets. However, the strict sense of arbitrage is hardly obtained after consideration the issues concerning transaction costs and time value of money. By using the identical assets such as Chinese ADRs and their underlying securities traded in different markets in Hong Kong in HK dollar and in New York in US dollar and by constructing a very simple arbitrage trading strategy, this study demonstrates that arbitrage profits are still available with monthly return ranging from 0.5 per cent to 3.8 per cent after considering transaction costs and non-overlap trading time issues. This is a new study to verify this behaviour of an emerging market’s ADRs traded in two financial market locations, so adding evidence of inefficiency in trading of China-listed stocks in foreign locations. 2013 Journal Article http://hdl.handle.net/20.500.11937/27866 http://epublications.bond.edu.au/ijbf/vol9/iss2/4 ?? restricted |
| spellingShingle | Trading strategy Arbitrage ADRs Transaction costs Financial markets Liu, Li Xian Bogomolov, T. The Law of One Price and Arbitrage on China's Dual-listings |
| title | The Law of One Price and Arbitrage on China's Dual-listings |
| title_full | The Law of One Price and Arbitrage on China's Dual-listings |
| title_fullStr | The Law of One Price and Arbitrage on China's Dual-listings |
| title_full_unstemmed | The Law of One Price and Arbitrage on China's Dual-listings |
| title_short | The Law of One Price and Arbitrage on China's Dual-listings |
| title_sort | law of one price and arbitrage on china's dual-listings |
| topic | Trading strategy Arbitrage ADRs Transaction costs Financial markets |
| url | http://epublications.bond.edu.au/ijbf/vol9/iss2/4 http://hdl.handle.net/20.500.11937/27866 |