A Study on the Arbitrage Transaction Profitability Using Exchange Traded Fund

Kang, Seok Kyu

Korean Journal of Financial Studies 2013;42(3):619-637.
Published online June 30, 2013.

Seok Kyu Kang

상장지수펀드를 이용한 차익거래 수익성에 관한 연구

강석규

Abstract

This study is to analyse and compare the arbitrage profitability between KOSPI200 futures and the spot index and between KOSPI200 futures and KODEX200 ETF. Analysis data is used by the minute-by-minute price series of the KOSPI200 spot index, KOSPI200 futures, and KODEX200 from May, 19, 2011 to November. 9, 2011. The empirical results of this study show that in general the higher the transaction costs increase, the more opportunities of short and long arbitrage transaction decrease. Also, KODEX200 ETF has more short arbitrage opportunities than long arbitrage opportunities at all levels of transaction costs relative to KOSPI200 cash index. This implies that the theoretical fair price is greater than the actual futures price. Moreover, the ex-post test shows that arbitrage transactions have profit in KOSPI200 spot basket and KODEX200 ETF at all levels of transaction costs ranging from 0.20 to 1.00%. Finally, the ex-ante test assuming a 5-min transaction lag shows that short arbitrage using KODEX200 seems to provide statistically significant and more profits over KOSPI200 spot program trading under transaction costs ranging from 0.20 to 0.50%. This may imply that pricing between KODEX200 ETF and KOSPI200 futures is less efficient.

Key Words: 보유비용모형,사전적 차익,상장지수펀드,차익거래,Cost-of-Carry Model,Ex-Ante Arbitrage,Exchange Traded Fun,KODEX200,KODEXon