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Does market efficiency matter for Shanghai 50 ETF index options?

Ariful Hoque, Thi Le, Morshadul Hasan, Abedin Abedin

Research in International Business and Finance, Volume: 67, Start page: 102129

Swansea University Author: Abedin Abedin

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DOI (Published version): 10.1016/j.ribaf.2023.102129

Abstract

This study aims to measure Shanghai 50 Exchange-Traded Fund (SSE 50 ETF) index options efficiency for trading in different periods of a trading day. We use an econometric model of put-call-parity to test the market efficiency for three moneyness situations: call at-the-money and put at-the-money, ca...

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Published in: Research in International Business and Finance
ISSN: 0275-5319 1878-3384
Published: Elsevier BV 2024
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URI: https://cronfa.swan.ac.uk/Record/cronfa64761
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first_indexed 2023-10-17T20:17:49Z
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spelling v2 64761 2023-10-17 Does market efficiency matter for Shanghai 50 ETF index options? 4ed8c020eae0c9bec4f5d9495d86d415 Abedin Abedin Abedin Abedin true false 2023-10-17 BAF This study aims to measure Shanghai 50 Exchange-Traded Fund (SSE 50 ETF) index options efficiency for trading in different periods of a trading day. We use an econometric model of put-call-parity to test the market efficiency for three moneyness situations: call at-the-money and put at-the-money, call in-the-money and put out-of-the-money, call out-of-the-money, and put in-the-money. The SSE 50 ETF index options market is efficient when both call and put options are at-the-money, leading to accurately-priced call and put options. The SSE 50 ETF index options market is inefficient if the call is in-the-money (out-of-the-money) and the put is out-of-the-money (in-the-money). Furthermore, call and put options are over-priced (under-priced) and underpriced (over-priced), respectively, when the SSE 50 ETF index options market is inefficient. Traders can take a long or short position based on call-put option pricing to reduce hedging costs and increase speculative premiums. Journal Article Research in International Business and Finance 67 102129 Elsevier BV 0275-5319 1878-3384 Options market efficiency, Trading strategy, SSE 50 ETF market efficiency, Put-call parity, Index options 31 1 2024 2024-01-31 10.1016/j.ribaf.2023.102129 http://dx.doi.org/10.1016/j.ribaf.2023.102129 COLLEGE NANME Accounting and Finance COLLEGE CODE BAF Swansea University SU Library paid the OA fee (TA Institutional Deal) Swansea University 2023-11-20T14:46:18.4155786 2023-10-17T21:17:19.6985263 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Ariful Hoque 1 Thi Le 2 Morshadul Hasan 3 Abedin Abedin 4 64761__29060__fb0571bfc6a44db1ac0b13f8f77ee4db.pdf 64761.VOR.pdf 2023-11-20T14:43:29.5504997 Output 457038 application/pdf Version of Record true Crown Copyright © 2023 Published by Elsevier B.V. Distributed under the terms of a Creative Commons Attribution 4.0 International License (CC BY 4.0). true eng https://creativecommons.org/licenses/by/4.0/
title Does market efficiency matter for Shanghai 50 ETF index options?
spellingShingle Does market efficiency matter for Shanghai 50 ETF index options?
Abedin Abedin
title_short Does market efficiency matter for Shanghai 50 ETF index options?
title_full Does market efficiency matter for Shanghai 50 ETF index options?
title_fullStr Does market efficiency matter for Shanghai 50 ETF index options?
title_full_unstemmed Does market efficiency matter for Shanghai 50 ETF index options?
title_sort Does market efficiency matter for Shanghai 50 ETF index options?
author_id_str_mv 4ed8c020eae0c9bec4f5d9495d86d415
author_id_fullname_str_mv 4ed8c020eae0c9bec4f5d9495d86d415_***_Abedin Abedin
author Abedin Abedin
author2 Ariful Hoque
Thi Le
Morshadul Hasan
Abedin Abedin
format Journal article
container_title Research in International Business and Finance
container_volume 67
container_start_page 102129
publishDate 2024
institution Swansea University
issn 0275-5319
1878-3384
doi_str_mv 10.1016/j.ribaf.2023.102129
publisher Elsevier BV
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
url http://dx.doi.org/10.1016/j.ribaf.2023.102129
document_store_str 1
active_str 0
description This study aims to measure Shanghai 50 Exchange-Traded Fund (SSE 50 ETF) index options efficiency for trading in different periods of a trading day. We use an econometric model of put-call-parity to test the market efficiency for three moneyness situations: call at-the-money and put at-the-money, call in-the-money and put out-of-the-money, call out-of-the-money, and put in-the-money. The SSE 50 ETF index options market is efficient when both call and put options are at-the-money, leading to accurately-priced call and put options. The SSE 50 ETF index options market is inefficient if the call is in-the-money (out-of-the-money) and the put is out-of-the-money (in-the-money). Furthermore, call and put options are over-priced (under-priced) and underpriced (over-priced), respectively, when the SSE 50 ETF index options market is inefficient. Traders can take a long or short position based on call-put option pricing to reduce hedging costs and increase speculative premiums.
published_date 2024-01-31T14:46:19Z
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score 11.037603

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