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Premiums and arbitrage of Asian Exchange Traded Funds

Author

Listed:
  • Marco Elia

    (Università di Torino)

Abstract

This paper investigates the characteristics of the premiums of a sample of traditional and synthetic Asian Etfs traded on the Italian market Etfplus. Asynchronous trading generates large premiums.The absence of barriers to arbitrage should, however, guarantee that this mispricing between the Nav and the market price is due only to the new information available after the close of the Asian markets, but before the closing of the trading on the Italian market. Excessive premiums should be immediately eliminated, thanks to the possibility of creating and redeeming Etf shares at the official Nav.The characteristics of the premiums confirm that arbitrage drives them down to zero over time. However, their serial correlation suggests that arbitrage costs play an important role.The results of the analysis of the absolute value of the premiums show that bidask spread, trading volume, volatility of the underlying index and the financial crisis are important explanatory factors.

Suggested Citation

  • Marco Elia, 2010. "Premiums and arbitrage of Asian Exchange Traded Funds," BANCARIA, Bancaria Editrice, vol. 12, pages 23-42, December.
    • Handle: RePEc:ban:bancar:v:12:y:2010:m:december:p:23-42
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    File URL: http://www.bancariaeditrice.it/prodotti/vedi/prodotto/id/2418/bancaria-n-12-2010
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    More about this item

    Keywords

    exchange traded fund; arbitraggio; premi; trading asincrono; indici asiatici;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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