Intraday indirect arbitrage between European index ETFs

Aliaa Bassiouny and Eskandar Tooma

International Review of Financial Analysis, 2021, vol. 75, issue C

Abstract: We investigate intraday arbitrage between close substitute Exchange-traded Funds (ETFs) on two major European indices: FTSE100 and DAX30. Using intraday data, we establish arbitrage links between our ETFs through cointegration and error correction models. We then apply an arbitrage identification procedure on approximately 18 million intraday matched quotes, resulting in 1.95% and 0.2% of observations on the ETF pairs for FTSE100 and DAX30 as arbitrage opportunities. They occur on specific days in our sample, disappear relatively quickly, and result in economically insignificant profits from arbitrage trades within the mispricing window, indicating overall price efficiency.

Keywords: Arbitrage; ETF; High-frequency trading (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:75:y:2021:i:c:s1057521921000806

DOI: 10.1016/j.irfa.2021.101737

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