Market Efficiency and Arbitrage Opportunities: The Case of Egyptian Global Depository Receipts

Abstract

This research examines the effect of the financial crisis on the behavior of the Egyptian GDR’s and their underlying stocks in Egypt. There were ten stocks tested that represent three main sectors which are; the financial sector, the telecom sector and the constructions sector. We found out that there are very low arbitrage opportunities between those two markets, and that these arbitrage opportunities were minimized during the previous crisis. Moreover we found out that the price behavior of the securities changed during the financial crisis, and they showed that the selling pressure appeared on the Egyptian stocks and not the GDR's.

Keywords: GDR, Arbitrage, Cross listing