Testing the pricing and informational efficiency of the S&P 500 stock index futures market.

Persistent Link:
http://hdl.handle.net/10150/184858
Title:
Testing the pricing and informational efficiency of the S&P 500 stock index futures market.
Author:
Hassan, Mahamood Mahomed.
Issue Date:
1989
Publisher:
The University of Arizona.
Rights:
Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.
Abstract:
Three empirical studies are conducted examining the efficiency of S&P 500 futures prices and the pricing of these futures contracts. In the first study, the ability of futures prices to predict the realized spot S&P 500 index prices on the expiration date is examined for near term contracts. The futures prices are found to be unbiased predictors of the realized spot index prices for the nineteen quarterly contracts from 1982 to 1986. Previous studies report significant deviations in S&P SOO futures prices from theoretically determined Cost of Carry Model (CCM) prices. In the second study, it is found that the CCM using the federal funds rate, a proxy for the overnight repurchase rate, provides relatively better estimates of the S&P S(x) futures prices over the 1984-1986 period. The futures mispricing also reflects the weekend effect anomaly: futures prices are "over-priced" relative to CCM prices on Mondays, whereas the opposite occurs on Fridays. The futures over-pricing (under-pricing) is characterized by "bull" ("bear") financial markets and the extent of price changes are relatively greater in the futures market. The futures under-pricing is supported by strong future market volume and open-interest positions. The basis and changes in it over the futures contract period are measures of how well integrated the futures market and the underlying spot market are. In the third study, based on daily closing prices for the S&P 500 index and index futures for the 1984-1986 period, it is found that the basis decreases over the contract period but the rate of decrease is independent of the time to expiration. The change in basis on Mondays is generally positive which also reflects the weekend effect anomaly. The daily basis is negative on 107 days, which generally occurs during strong futures market trading volume and open interest positions. It is doubtful whether the negative basis can be attributed to a negative net financing cost, where the dividend yield 0.1 the spot index exceeds the cost of financing the spot index forward.
Type:
text; Dissertation-Reproduction (electronic)
Keywords:
Stock index futures.; Stock price forecasting.
Degree Name:
Ph.D.
Degree Level:
doctoral
Degree Program:
Business Administration; Graduate College
Degree Grantor:
University of Arizona
Advisor:
Bierway, Gerald O.

Full metadata record

DC FieldValue Language
dc.language.isoenen_US
dc.titleTesting the pricing and informational efficiency of the S&P 500 stock index futures market.en_US
dc.creatorHassan, Mahamood Mahomed.en_US
dc.contributor.authorHassan, Mahamood Mahomed.en_US
dc.date.issued1989en_US
dc.publisherThe University of Arizona.en_US
dc.rightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.en_US
dc.description.abstractThree empirical studies are conducted examining the efficiency of S&P 500 futures prices and the pricing of these futures contracts. In the first study, the ability of futures prices to predict the realized spot S&P 500 index prices on the expiration date is examined for near term contracts. The futures prices are found to be unbiased predictors of the realized spot index prices for the nineteen quarterly contracts from 1982 to 1986. Previous studies report significant deviations in S&P SOO futures prices from theoretically determined Cost of Carry Model (CCM) prices. In the second study, it is found that the CCM using the federal funds rate, a proxy for the overnight repurchase rate, provides relatively better estimates of the S&P S(x) futures prices over the 1984-1986 period. The futures mispricing also reflects the weekend effect anomaly: futures prices are "over-priced" relative to CCM prices on Mondays, whereas the opposite occurs on Fridays. The futures over-pricing (under-pricing) is characterized by "bull" ("bear") financial markets and the extent of price changes are relatively greater in the futures market. The futures under-pricing is supported by strong future market volume and open-interest positions. The basis and changes in it over the futures contract period are measures of how well integrated the futures market and the underlying spot market are. In the third study, based on daily closing prices for the S&P 500 index and index futures for the 1984-1986 period, it is found that the basis decreases over the contract period but the rate of decrease is independent of the time to expiration. The change in basis on Mondays is generally positive which also reflects the weekend effect anomaly. The daily basis is negative on 107 days, which generally occurs during strong futures market trading volume and open interest positions. It is doubtful whether the negative basis can be attributed to a negative net financing cost, where the dividend yield 0.1 the spot index exceeds the cost of financing the spot index forward.en_US
dc.typetexten_US
dc.typeDissertation-Reproduction (electronic)en_US
dc.subjectStock index futures.en_US
dc.subjectStock price forecasting.en_US
thesis.degree.namePh.D.en_US
thesis.degree.leveldoctoralen_US
thesis.degree.disciplineBusiness Administrationen_US
thesis.degree.disciplineGraduate Collegeen_US
thesis.degree.grantorUniversity of Arizonaen_US
dc.contributor.advisorBierway, Gerald O.en_US
dc.contributor.committeememberCarleton, Willard T.en_US
dc.contributor.committeememberDyl, Edward A.en_US
dc.identifier.proquest9010478en_US
dc.identifier.oclc703427626en_US
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