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      Examining arbitrage opportunities among Canadian cross-listed securities : evidence from stock and option markets

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      Date
      2009-08
      Author
      Li, Zhen
      Type
      Thesis
      Degree Level
      Masters
      Metadata
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      Abstract
      A cross-border listing occurs when an individual company establishes a secondary listing on a stock exchange abroad. In this paper, we analyze and compare the arbitrage proportions (through violation of put-call parity) of publicly traded cross-listed Canadian stocks, and those of industry and performance matched US domestically-listed shares. The cross-listed Canadian stocks are listed on both of the Toronto Stock Exchange (TSX) and either the New York Stock Exchange (NYSE) or the American Stock Exchange (AMEX). Arbitrage opportunities exist when put-call parity is violated. Our empirical results show that in most circumstances, both domestic put-call parity and cross-border put-call parity hold well in the two countries. However, in Canadian market, a high proportion of arbitrage op-portunities could be detected in closing prices on the particular date of March 14, 2007. On March 14th 2007, many of the observations in the Canadian market contained arbi-trage opportunities. Both domestic and cross-border put-call parity was violated. However, we fail to find the same phenomenon in the US market. In the US market, opportunities for arbitrage occur rarely and sporadically. We also find that the option trading volume in the Canadian market is lower than that in the US market, and during dramatic market price drops, the option trading volume remains at a low level.
      Degree
      Master of Science (M.Sc.)
      Department
      Finance and Management Science
      Program
      Finance and Management Science
      Supervisor
      Wilson, Craig
      Committee
      Racine, Marie; Huq, Mobinul; Mamun, Abdullah; Wu, Zhenyu
      Copyright Date
      August 2009
      URI
      http://hdl.handle.net/10388/etd-08192009-190713
      Subject
      Put-call parity
      Arbitrage
      Dual-listing
      Integration
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