A DECOMPOSITION OF STOCK INDEX FUTURES MISPRICING AND THE PRICE EFFECT OF INDEX ARBITRAGE

Arjin Tushaj and Valentina Sinaj
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Arjin Tushaj: University of Tirana, Albania
Valentina Sinaj: University of Tirana, Albania

Studies in Business and Economics, 2012, vol. 7, issue 2, 184-196

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.

Keywords: stock index futures mispricing; index arbitrage; market efficiency (search for similar items in EconPapers)
Date: 2012
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