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Pricing Efficiency (pricing + efficiency)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

Efficiency in the Pricing of the FTSE 100 Futures Contract

EUROPEAN FINANCIAL MANAGEMENT, Issue 1 2001
Joëlle Miffre
This paper studies the pricing efficiency in the FTSE 100 futures contract by linking the predictable movements in futures returns to the time-varying risk and risk premia associated with prespecified factors. The results indicate that the predictability of the FTSE 100 futures returns is consistent with a conditional multifactor model with time-varying moments. The dynamics of the factor risk premia, combined with the variation in the betas, capture most of the predictable variance of returns, leaving little variation to be explained in terms of market inefficiency. Hence the predictive power of the instruments does not justify a rejection of market efficiency. [source]

Relationships between Australian real estate and stock market prices,a case of market inefficiency

JOURNAL OF FORECASTING, Issue 3 2002
John Okunev
Abstract This paper explores the relationship between the Australian real estate and equity market between 1980 and 1999. The results from this study show three specific outcomes that extend the current literature on real estate finance. First, it is shown that structural shifts in stock and property markets can lead to the emergence of an unstable linear relationship between these markets. That is, full-sample results support bi-directional Granger causality between equity and real estate returns, whereas when sub-samples are chosen that account for structural shifts the results generally show that changes within stock market prices influence real estate market returns, but not vice versa. Second, the results also indicate that non-linear causality tests show a strong unidirectional relationship running from the stock market to the real estate market. Finally, from this empirical evidence a trading strategy is developed which offers superior performance when compared to adopting a passive strategy for investing in Australian securitized property. These results appear to have important implications for managing property assets in the funds management industry and also for the pricing efficiency within the Australian property market. Copyright © 2002 John Wiley & Sons, Ltd. [source]

Decimalization, ETFs and futures pricing efficiency

THE JOURNAL OF FUTURES MARKETS, Issue 2 2009
Wei-Peng Chen
This study investigates the impact of decimalization (penny pricing) on the arbitrage relationship between index exchange-traded funds and E-mini index futures. The empirical results reveal that subsequent to penny pricing, there is a significant fall in the mean ex ante arbitrage profit, especially in the cases with higher transaction costs. Using the ordinary least squares and quantile regressions to control for the influences of changes in other market characteristics, it is found that the overall pricing efficiency has deteriorated in the post-decimalization period. These results are consistent with the hypothesis that, due to the lowered market depth and increased execution risks, the introduction of decimalization has in general resulted in weakening the ability and the willingness of arbitrageurs to initiate arbitrage trades, which subsequently leads to a reduction in the general efficiency of the cash/futures pricing system. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 29:157,178, 2009 [source]

How electronic trading affects bid-ask spreads and arbitrage efficiency between index futures and options

THE JOURNAL OF FUTURES MARKETS, Issue 4 2005
Kevin H. K. Cheng
This paper examines the impact of switching to electronic trading on the relative pricing efficiency of Hang Sang Index futures and options contracts traded on the Hong Kong exchange. The study is motivated by the recent shift in 2000 from the pit to an electronic trading platform. Electronic trading leads to lower bid-ask spreads and less price clustering than floor trading in both the options and futures markets. Mispricing between futures and options drops significantly after the change. Quicker correction of mispricing indicates a significant improvement in dynamic inter-market arbitrage efficiency with electronic trading. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:375,398, 2005 [source]