Title

Intraday indirect arbitrage between European index ETFs

Second Author's Department

Management Department

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https://doi.org/10.1016/j.irfa.2021.101737

Document Type

Research Article

Publication Title

International Review of Financial Analysis

Publication Date

5-1-2021

doi

10.1016/j.irfa.2021.101737

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.

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