Share Price Index Research Articles

INDEX FUTURES OPTIONS IN AUSTRALIA ‐AN EMPIRICAL FOCUS ON VOLATILITY

Abstract:The futures option contract on the Australian All Ordinaries Share Price Index is a relatively new hybrid security that ought to enhance the richness and potential efficiency of security markets. This paper considers the problems of valuing it using the theoretical price of a futures‐style option. It was found that there was little consistency between theoretical prices using a number of historical estimates and observed market prices, either intertemporally or between in‐the‐money or out‐of‐the‐money calls. Further, implied volatility was found to be a decaying function of time and, except at times of instability, did not predict the ex ante futures volatility as well as historic volatility.

Informational efficiency of European equity markets

A technique developed by Granger (1969) (Granger causality) is used to determine the informational efficiency of the following eight European equity markets: Amsterdam, Frankfurt, Paris, Dublin, Milan, Brussels, Copenhagen and London from January 1980 to December 1989. Share prices should react instantaneously to new information, whereas real economic variables, such as industrial volume and unemployment rates may take longer to adjust. Granger causality may be used to determine whether changes and volatility in share price indices lead or are led by changes in industrial volume and unemployment rates. If markets are informationally efficient the share price variables should lead the real economic variables. This methodology was previously employed by Huang and Kracaw (1984) based on US data, and Kamarotou and O'Hanlon (1989) based on UK, US, Japanese and Canadian data. There was little evidence to suggest that either share price variables lead real economic variables, or vice versa. This is contrary to the results of the studies of Huang and Kracaw and Kamarotou and O'Hanlon where share price variables were generally found to lead real economic variables.

After-Hours Stock Prices and Post-Crash Hangovers

After-hours pricing in foreign equity markets of multiple-listed U.S. securities appeared to be efficient in predicting New York prices in the weeks immediately following the October 1987 crash but relatively uninformative in succeeding months. By contrast, daily changes in New York prices appear to be efficiently incorporated in after-hours trading on both the Tokyo and London exchanges throughout the sample period. This paper suggests that the asymmetry and temporal variations in cross-market correlations are consistent with rational investor behavior in equity markets with nonzero transaction costs and time-varying share price volatility. IN THE WAKE OF the October 1987 crash, a number of studies have provided evidence of significant international linkages among national equity markets where high-frequency movements in the share price indices of national exchanges appear to induce sympathetic price movements in subsequent trading on other national exchanges.' However, the cross-market correlations are generally much larger in periods of extreme volatility and appear to subside to modest or even negligible associations during periods of more normal trading activity. Since the constituent stocks of national exchange indices are not identical, it may be that the episodic increases in correlated movements of the indices are due to changes in the actual (or perceived) relative importance of common factors in periods of unusual volatility. The thrust of this paper is to remove the issue of the disparate composition of the price indices of national exchanges by examining the prices of a set of

Structure and performance: Global interdependence of stock markets around the crash of October 1987∗

Using a new data source on share price indices, this paper finds no evidence that the substantial variations in the reactions to the crash of October 1987 across countries are related to the structure of markets. However, trading halts and capital controls on residents may have moderated the speed of declines in some markets. The paper also examines one measure of interlinkages between markets, the trading of foreign stocks on domestic markets, and finds this to be closely related to interdependence between markets.

Australian All Ordinaries Share Price Index Futures and Random Walks

The study covers the period 16/3/83 to 31/12/87, using daily futures prices to provide descriptive statistics and statistical tests for a random walk. The study period falls naturally into two periods, the pre-crash and period including the 1987 crash. The random walk hypothesis provides a “rough” description of futures price changes in the pre-crash period but is rejected for the full period. Some indication of the effect of the 1987 crash period on share price index futures prices is demonstrated via descriptive statistics. Day in the week effects are isolated both in terms of variance and returns. The existence of these effects suggest that random walk is at best an imperfect description of price changes over time.

Arbitrage Opportunities in The Australian Share Price Index Futures Contract

This study examines the pricing behaviour of share price index futures contracts traded on the Australian market. Particularly, we investigate the relationship between futures prices and the no-arbitrage price predicted by the current spot prices. Consistent with similar studies of U.S. markets, we find that the observed share price index futures prices differ from those predicted by the no-arbitrage prices, but that the size and sign of this difference is not constant across the contracts or across the time period included in our sample. The explanations suggested in the literature for the existence of these price differences are predominantly institutional in nature. These include differential tax treatment, short selling constraints, thin trading and transaction costs. We find that these explanations do not appear to be capable of explaining the size or sign of the pricing differences we observe.

Indexes of Ordinary Share Prices-An Evaluation

Indexes of share prices serve the purpose of summary measure of behaviour of security prices and stock market. Equity share price movement is, by and large, the most sensitive element since it is subject to high risk and return which arises on account of its size and nature of investment. The principal equity share price indexes used by investors are: (i) Resave Bank of India Index (ii) Economic Times Index (iii) Financial Express Index

The Distribution of Share Price Changes

This paper presents both theoretical and empirical evidence about a probability distribution which describes the behavior of share price changes. Osborne's Brownian motion theory of share price changes is modified to account for the changing variance of the share market. This produces a scaled t-distribution which is an excellent fit to series of share price indices. This distribution is the only known simple distribution to fit changes in share prices. It provides a far better fit to the data than the stable Paretian, compound process, and normal distributions.

Share Price Indices in Australia.

Share Price Indices in Australia.

BOOK REVIEWS

Book reviewed in this article:Business Finance: Basic Business Finance: Text and Cases. By Pearson Hunt, C. M. Williams, and G. Donaldson.Business Finance: Share Price Indices in Australia. By D. Mc L. Lamberton.Business Finance: Quasi‐Reorganization. By James S. Schindler.Consumer Finance: Buy or Rent? By William I. Greenwald.Consumer Finance: Make Your Income Count. By Donald Rogers.Insurance: Compulsory Temporary Disability Insurance in the United States. By Grant M. Osborn.Insurance: Group Disability Insurance. By Jesse P. Pickrell.International Finance: The International Economy. By P. T. Ellsworth.International Finance: Economic Development. By Charles P. Kindleberger.International Finance: The Bank for International Settlements. By Henry C. Schloss.International Finance: Introduction to International Economics. By Delbert A. Snider.Investments: American Investment in British Manufacturing Industry. By John H. Dunning.Investments: Income Growth with Security: The Formula‐Plan Solution. By Sherman F. Feyler.Investments: Corporate Bond Quality and Investor Experience. By W. Braddock Hickman.Money and Banking: The Monetary and Fiscal Policy of India. By K. C. Chacko.Money and Banking: Business Cycles and Economic Growth. By James S. Duesenberry.Money and Banking: Financial Intermediaries in the American Economy since 1900. By Raymond W. Goldsmith.Money and Banking: Modern Banking. By R. S. Sayers.Public Finance: Taxation in Australia. By Walter W. BrudnoPublic Finance: Public Principles of Public Debt: A Defense and Restatement. By James M. Buchanan.Public Finance: Financing Government. By Harold M. Groves.Public Finance: The Income‐Tax Burden on Stockholders. By Daniel M. Holland.Public Finance: Classics in the Theory of Public Finance. Edited by Richard A. Musgrave and Alan T. Peacock.Public Finance: A Tax Program for Small Business: How Should Small Corporations Be Taxed? By George E. Lent.

SOME STATISTICS OF SECURITY PRICES AND YIELDS IN THE SYDNEY MARKET, 1875–19331

Economic RecordVolume 34, Issue 68 p. 253-259 SOME STATISTICS OF SECURITY PRICES AND YIELDS IN THE SYDNEY MARKET, 1875–19331 D. McL. Lamberton, D. McL. Lamberton Nuffield College, OxfordSearch for more papers by this author D. McL. Lamberton, D. McL. Lamberton Nuffield College, OxfordSearch for more papers by this author First published: August 1958 https://doi.org/10.1111/j.1475-4932.1958.tb01333.xCitations: 3 1 These statistics are part of the results of an investigation into security prices and yields in the Sydney market which has been carried out with financial assistance from the Sydney Stock Exchange, ‘the Life Offices’ Association for Australasia, the Stock Exchange of Melbourne, the Bank of New South Wales and the Commercial Banking Company of Sydney Limited. For other results see D. McL. Lamberton. Share Price Indices in Australia (Sydney: Law Book Co. of Australasia Pty. Ltd., 1958) and “ Economic Growth and Stock Prices: The Australian Experience”, Jour. Bus. Univ. Chicago, xxxi, 3 (July, 1958). The statistics now presented for the period 1901–1955” were incorporated in a paper entitled “Some Aspects of Security Prices and Yields in the Sydney Market, 1901–1955” read before the Statistical Society of New South Wales in March, 1957. I should like to acknowledge the assistance of Miss Gwen& Cane, B.Sc, in this investigation and thank the firm of T. J. Thompson and Sons for lending their records Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Citing Literature Volume34, Issue68August 1958Pages 253-259 RelatedInformation