Index Purpose #
The Dual Class Arbitrage Indices offered by Quantitative Global Indices (“QGI”), aim to track the dispersion in returns of stocks with dual-listed shares.
Index Construction #
Taking the QGI Google Dual Class Arbitrage Index for example, the index tracks the performance of Alphabet Inc.’s Class C (“GOOG”) and Class A (“GOOGL”) shares. The fundamental difference between these two securities is that GOOGL shares have voting rights, while GOOG shares do not. Because of this, GOOGL shares may trade at a slight nominal premium (e.g., GOOGL trading for $97, GOOG trading for $96.50).
While this slight premium may justifiably exist, there exists arbitrage opportunities when relative premiums/discounts exist. As shown below, the intraday performance of both securities show a near perfect correlation, but when the difference of returns increases (the “spread”), a trade opportunity exists in buying the under-performing shares and selling short the over-performing shares.
The spread is quoted in percent, so an index value of 0.12 represents a 0.12% absolute difference. Assuming a mean spread of 0.00, this 0.12% can also represent the profit to be made from buying the weaker performing shares and selling short the over-performing shares.
Index Dissemination #
Each trading day, the index will reset and start with a value of 0.00. Performance is tracked from market open onwards, not performance from the prior close, therefore pre-market activity is not considered. Each respective index will update on an intraday, 1-minute basis. Each new data point, as well as each historical data point, will be instantly available over the API.
Historical index values and compositions are available through a subscription.
Quantitative Global Indices, LLC