| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 963443 | Journal of International Financial Markets, Institutions and Money | 2012 | 19 Pages |
Abstract
⺠We examine the risks and returns to arbitraging UK stock-ADR pricing anomalies. ⺠We introduce pairs trading as the main mechanism by which stock-ADR parity is maintained, which contrasts with the direct arbitrage approach which is the main focus of the ADR literature. ⺠Pairs trading is cheap to implement, and carries minimal risk. ⺠The main disincentive to arbitrage stems from uncertainty toward trade duration. ⺠Stock-ADR prices are not auto-efficient, arbitrage via pairs trading succeeds in enforcing price parity.
Related Topics
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Authors
Hamad Alsayed, Frank McGroarty,