Arbitrage Trading Based on Cointegration

Does arbitrage trading based on a cointegrating relation work? The efficient market hypothesis insists that there exists no successful trading. In order to avoid problems with data snooping, we choose 5 industrial average indices and a market index to make a cointegration analysis between 6 variables. Many cointegrating relations are found in 3 countries; Japan, the UK, and the USA. Using the facts, we simulate arbitrage trading between a market index and an industrial averages portfolio for each country. The calculation of this simulation shows that the arbitrage is successful. The average returns on the trading are monthly 0.3% to 0.5%.