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A Decomposition Of Stock Index Futures Mispricing And The Price Effect Of Index Arbitrage

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Author Info

  • TUSHAJ Arjin

    (University of Tirana, Albania)

  • SINAJ Valentina

    (University of Tirana, Albania)

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    Abstract

    The importance of the arbitrage theories and the notion of efficient evaluation for the usual market index give a strong motivation for an empirical analysis of the relationship between the current prices and lost future prices. This article developed an empirical system that attempts to characterize the dynamic interactions between these variables. The analysis in this article is motivated from the existence of interrelated markets that trade inter-convertible goods and the common future index. The importance of the mispricing prospective is a whole comprehension of future market efficiency. Mispricing series should be decomposed respectively in equivalency’s relative contribution and future markets. This article attempts to get such decomposition and to bring to light on what was done in the past with the usual future index sources, the mispricing and the market efficiency.

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    File URL: http://eccsf.ulbsibiu.ro/RePEc/blg/journl/7214tushaj&sinaj.pdf
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    Bibliographic Info

    Article provided by Lucian Blaga University of Sibiu, Faculty of Economic Sciences in its journal Studies in Business and Economics.

    Volume (Year): 7 (2012)
    Issue (Month): 2 (August)
    Pages: 184-196

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    Handle: RePEc:blg:journl:v:7:y:2012:i:2:p:184-196

    Contact details of provider:
    Postal: Lucian Blaga University of Sibiu, Faculty of Economic Sciences Dumbravii Avenue, No.17, postal code 550324, Sibiu, Romania
    Phone: 004 0269 210375
    Fax: 004 0269 210375
    Email:
    Web page: http://economice.ulbsibiu.ro/
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    Related research

    Keywords: stock index futures mispricing; index arbitrage; market efficiency;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Peiers, Bettina, 1997. " Informed Traders, Intervention, and Price Leadership: A Deeper View of the Microstructure of the Foreign Exchange Market," Journal of Finance, American Finance Association, vol. 52(4), pages 1589-1614, September.
    2. Gerald P. Dwyer, Jr. & Peter Locke & Wei Yu, 1995. "Index arbitrage and nonlinear dynamics between the S&P 500 futures and cash," Working Paper 95-17, Federal Reserve Bank of Atlanta.
    3. Hasbrouck, Joel, 1991. " Measuring the Information Content of Stock Trades," Journal of Finance, American Finance Association, vol. 46(1), pages 179-207, March.
    4. Hansen, Lars Peter & Sargent, Thomas J., 1980. "Formulating and estimating dynamic linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 7-46, May.
    5. Neal, Robert, 1996. "Direct Tests of Index Arbitrage Models," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(04), pages 541-562, December.
    6. Chung, Y Peter, 1991. " A Transactions Data Test of Stock Index Futures Market Efficiency and Index Arbitrage Profitability," Journal of Finance, American Finance Association, vol. 46(5), pages 1791-809, December.
    7. Chan, Louis K. C. & Lakonishok, Josef, 1993. "Institutional trades and intraday stock price behavior," Journal of Financial Economics, Elsevier, vol. 33(2), pages 173-199, April.
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