American Depositary: A Case Study for Brazilian Market

Specialists often question market efficiency. Some works suggest arbitrage opportunities in several financial operations. Such opportunities can be explained mainly by information asymmetry, since pricing in the stock market is directly linked to information; therefore, the investor that has access to such information the soonest has a competitive advantage. The objective of this paper is to verify the existence of arbitrage opportunities via ADRs, traded in the American market, and their respective stocks, which are traded in the domestic market. Through a case study conducted with four companies, not considering the transition costs, arbitrage opportunity windows were found. Among the companies studied, two had frequent arbitrage opportunities, for one of them the arbitrage opportunity can be shaped by the time series model.