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A Box Spread Test of the SET50 Index Options Market Efficiency: Evidence from the Thailand Futures Exchange

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  • Woradee Jongadsayakul

    (Department of Economics, Faculty of Economics, Kasetsart University, Bangkhen Campus, 50 Ngam Wong Wan Road, Ladyao Chatuchak, Bangkok 10900, Thailand.)

Abstract

This paper provides the box spread test of the SET50 index options market efficiency using daily data from October 29, 2012, through March 30, 2016. The results show that the market frictions imposed by the bid-ask spread, along with brokerage commissions, exchange fees, and interest on initial margin deposit, appear to have a significant effect on arbitrageurs' abilities to take advantage of the mispricing of the box spreads. When using bid-ask prices rather than closing prices, the box spread arbitrage opportunities drop to

Suggested Citation

  • Woradee Jongadsayakul, 2016. "A Box Spread Test of the SET50 Index Options Market Efficiency: Evidence from the Thailand Futures Exchange," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1744-1749.
    • Handle: RePEc:eco:journ1:2016-04-61
    as

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    References listed on IDEAS

    as
    1. Vipul, 2009. "Box‐spread arbitrage efficiency of Nifty index options: The Indian evidence," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 29(6), pages 544-562, June.
    2. Ackert, Lucy F. & Tian, Yisong S., 2001. "Efficiency in index options markets and trading in stock baskets," Journal of Banking & Finance, Elsevier, vol. 25(9), pages 1607-1634, September.
    3. Ronn, Aimee Gerbarg & Ronn, Ehud I, 1989. "The Box Spread Arbitrage Conditions: Theory, Tests, and Investment Strategies," Review of Financial Studies, Society for Financial Studies, vol. 2(1), pages 91-108.
    4. Lucy F. Ackert & Yisong S. Tian, 2000. "Evidence on the efficiency of index options markets," Economic Review, Federal Reserve Bank of Atlanta, vol. 85(Q1), pages 40-51.
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    More about this item

    Keywords

    Market Efficiency; Index Options; Box Spreads;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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