Does ETF arbitrage exist?
by Stoyu I. Ivanov
International Journal of Financial Services Management (IJFSM), Vol. 6, No. 3, 2013

Abstract: This study examines whether Exchange Traded Funds' (ETF) arbitrage which ensures that the ETF closely tracks its underlying index exists on intradaily basis. I document that this arbitrage mechanism does exist and varies across ETFs. DIA and QQQQ have the most dynamic arbitrage activity; whereas SPY and IWM exhibit less active arbitrage trading. The paper also finds that the ETF changes in volume are not autocorrelated but that the ETF pricing deviations exhibit strong autocorrelation.

Online publication date: Wed, 27-Nov-2013

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