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The Law of One Price and Arbitrage on China’s Dual-Listings in Hong Kong and New York

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 mon...

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Main Authors: Liu, Lixian, Bogomolov, Timofei
Format: Article
Language:English
Published: Universiti Utara Malaysia 2012
Subjects:
HG Finance
Online Access:http://repo.uum.edu.my/25023/1/IJBF%209%202%202012%2058%2076.pdf
http://repo.uum.edu.my/25023/
http://ijbf.uum.edu.my/index.php/previous-issues/146-the-international-journal-of-banking-and-finance-ijbf-vol-9-no-2-june-2012
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id my.uum.repo.25023
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spelling my.uum.repo.250232018-10-25T00:34:56Z http://repo.uum.edu.my/25023/ The Law of One Price and Arbitrage on China’s Dual-Listings in Hong Kong and New York Liu, Lixian Bogomolov, Timofei HG Finance 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 two financial market locations, so adding evidence of inefficiency in trading of China-listed stocks in foreign locations. Universiti Utara Malaysia 2012 Article PeerReviewed application/pdf en http://repo.uum.edu.my/25023/1/IJBF%209%202%202012%2058%2076.pdf Liu, Lixian and Bogomolov, Timofei (2012) The Law of One Price and Arbitrage on China’s Dual-Listings in Hong Kong and New York. The International Journal of Banking and Finance, 9 (2). pp. 58-76. ISSN 1617-722 http://ijbf.uum.edu.my/index.php/previous-issues/146-the-international-journal-of-banking-and-finance-ijbf-vol-9-no-2-june-2012
institution Universiti Utara Malaysia
building UUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Utara Malaysia
content_source UUM Institutionali Repository
url_provider http://repo.uum.edu.my/
language English
topic HG Finance
spellingShingle HG Finance
Liu, Lixian
Bogomolov, Timofei
The Law of One Price and Arbitrage on China’s Dual-Listings in Hong Kong and New York
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 two financial market locations, so adding evidence of inefficiency in trading of China-listed stocks in foreign locations.
format Article
author Liu, Lixian
Bogomolov, Timofei
author_facet Liu, Lixian
Bogomolov, Timofei
author_sort Liu, Lixian
title The Law of One Price and Arbitrage on China’s Dual-Listings in Hong Kong and New York
title_short The Law of One Price and Arbitrage on China’s Dual-Listings in Hong Kong and New York
title_full The Law of One Price and Arbitrage on China’s Dual-Listings in Hong Kong and New York
title_fullStr The Law of One Price and Arbitrage on China’s Dual-Listings in Hong Kong and New York
title_full_unstemmed The Law of One Price and Arbitrage on China’s Dual-Listings in Hong Kong and New York
title_sort law of one price and arbitrage on china’s dual-listings in hong kong and new york
publisher Universiti Utara Malaysia
publishDate 2012
url http://repo.uum.edu.my/25023/1/IJBF%209%202%202012%2058%2076.pdf
http://repo.uum.edu.my/25023/
http://ijbf.uum.edu.my/index.php/previous-issues/146-the-international-journal-of-banking-and-finance-ijbf-vol-9-no-2-june-2012
_version_ 1644284204147539968
score 13.211869

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