Exchange Traded Funds: Co-Integration and the U-Shape

Abstract

This paper analyzes the intraday shape of New York Stock Exchange (NYSE) ETFs as well as iShares ETFs cross-traded on both the NYSE and London Stock Exchange (LSE). We found the intraday U-shape pattern for NYSE ETFs and NYSE iShares ETFs for trade price volatility, volume, and depth. However, the LSE iShares ETFs have a shape that is consistent with a double humped pattern. The US and the UK markets are not integrated across the whole day but in the overlapping period there is evidence of integration with limited price discovery outside of the financial meltdown of 2008.