Index Arbitrage and Futures Pricing Efficiency: Evidence from Thailand
37 Pages Posted: 23 Aug 2011 Last revised: 15 Dec 2011
Date Written: August 23, 2011
Using both daily and intraday data, this research examines the contribution of the exchange-traded fund TDEX to pricing efficiency of the SET50 futures with respect to the SET50 index. In order to analyze the efficiency of the SET50 futures price, frequencies of mispricing and arbitrage as well as arbitrage profitability are measured. In particular, the following three arbitrage trades are analyzed: (1) SET50 futures vs. TDEX, (2) SET50 futures vs. SET50 component stocks, and (3) TDEX vs. SET50 component stocks. Empirical evidence indicates that the introduction of TDEX does not contribute to pricing efficiency of SET50 futures with respect to the cash index.
Keywords: Index arbitrage, Liquidity, Exchange-traded fund, Index futures, Stock Exchange of Thailand
JEL Classification: G12, G13, G14
Suggested Citation: Suggested Citation