December 5, 2022 - 2:00 pm
December 5, 2022 - 3:00 pm
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Explore arbitrage opportunities with exchange-traded funds: an example of FUEKIV30 based on empirical evidence
Student: Nguyễn Duy Hậu, VNP-25
Supervisor: Dr. Trương Đăng Thụy
Exchange-traded funds (ETFs) are an efficient investing instrument, which highly absorbs investment stream, especially in emerging markets. To provide a new perspective for investors trading local-based ETFs, this study aims to investigate pricing efficiency and explore if
arbitrage opportunities exist. The author selected FUEKIV30, the newly listed ETF, to do the research. A three-step process of analysis was carried out with daily and intraday data. First, regressing the price and net asset value to see their relationship. Second, measuring the pricing efficiency with price deviation in percent to its NAV (called the premium). Finally, testing the persistency of premium with lagged variables added in succession. Results showed the two prices of FUEKIV30 moving in pairs. FUEKIV30 is trading at a minor rate of premium (1.13%) and is pricing efficiently intraday. Daily premium (0.15%) is not statistically significant but the daily mispricing calculated as absolute premium is and may possible for arbitrage. Besides, results of the persistency test of premiums recommend investors act arbitrages within five minutes of appearing during a trading day and within two days of occurring at the closing ofeach trading day. Though, investors should cogitate the cost to cover arbitrages.
Key words: Intraday data, Daily trading, Arbitrage opportunity, Exchange-traded fund, ETF, FUEKIV30, Vietnam, HOSE, Premium, Discount, Price Deviation, Mispricing.
JEL codes: B41, E44, G12, G14