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Overlapping ETF: Pair trading between two gold stocks

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Author Info

  • Bell, Peter N
  • Lui, Brian
  • Brekke, Alex

Abstract

The purpose of this paper is to propose a trading strategy for overlapping ETF and calculate the profitability using real price data. For two overlapping ETF that are designed to provide the same intraday percentage change, the difference in percentage changes is a measure of mispricing. This mispricing is the central focus of the paper. The premise of the paper is that mispricing can take large positive or negative values, but it will always come back to zero. This assumption reflects our view that ETF are generally priced correctly but will occasionally deviate.

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File URL: http://mpra.ub.uni-muenchen.de/39534/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 39534.

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Date of creation: 01 Apr 2012
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Handle: RePEc:pra:mprapa:39534

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Related research

Keywords: Pair trading; ETF; Gold; Mispricing;

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  1. Sanford J Grossman & Joseph E Stiglitz, 1997. "On the Impossibility of Informationally Efficient Markets," Levine's Working Paper Archive 1908, David K. Levine.
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