International High-Frequency Arbitrage for Cross-Listed Stocks
Cédric Poutré (),
Georges Dionne and
Gabriel Yergeau ()
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Cédric Poutré: Université de Montréal
Gabriel Yergeau: HEC Montreal, Canada Research Chair in Risk Management
No 21-4, Working Papers from HEC Montreal, Canada Research Chair in Risk Management
We explore mean-reverting arbitrage activities for international cross-listed stocks and develop a methodology to study the effect of information latency in high-frequency trading. The high-frequency strategy is a hybrid between triangular arbitrage and pairs trading. The strategy can be generalized to multiple cross-listed stocks environments without additional restrictions. Market frictions such as trade costs, inventory control, and arbitrage risks are considered. We test the strategy with cross-listed stocks involving three exchanges in Canada and the United States in 2019. The annual net profit with the limit order strategy is around US$6 million. International latency arbitrage with market orders is not profitable with our data.
Keywords: Latency arbitrage; high-frequency trading; cross-listed stocks; mean-reverting arbitrage; international arbitrage; supervised machine learning (search for similar items in EconPapers)
JEL-codes: G02 G10 G11 G14 G15 G22 (search for similar items in EconPapers)
Pages: 90 pages
Date: 2021-07-20, Revised 2022-03-15
New Economics Papers: this item is included in nep-cmp, nep-cwa and nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:ris:crcrmw:2021_004
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