The proof is in the pudding: Arbitrage is possible in limited emerging markets
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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Volume (Year): 23 (2013)
Issue (Month): C ()
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