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Reexamining the uncertain information hypothesis on the S&P 500 Index and SPDRs

Reexamining the uncertain information hypothesis on the S&P 500 Index and SPDRs This paper examines the uncertain information hypothesis on one major index and its corresponding exchange-traded fund: the S&P 500 Index and SPDRs in the pre-SPDRs (01/63–12/93) and post-SPDRs (01/94–12/03) periods. Two strategies are used to measure the economic significance of the uncertain information hypothesis. Overall, we present evidence confirming the uncertain information hypothesis in the post-SPDRs period. However, we fail to convert the statistically significant gains observed into economic gains under a conservative approach. In addition, the degree of difference in the volatilities of the 5-day post-event returns (in both the S&P 500 and the SPDR) among the three subgroups diminishes in the post-SPDR period. Hence, we conclude that the market is in fact short-term efficient in a more realistic setting. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Reexamining the uncertain information hypothesis on the S&P 500 Index and SPDRs

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References (15)

Publisher
Springer Journals
Copyright
Copyright © 2009 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
DOI
10.1007/s11156-009-0119-x
Publisher site
See Article on Publisher Site

Abstract

This paper examines the uncertain information hypothesis on one major index and its corresponding exchange-traded fund: the S&P 500 Index and SPDRs in the pre-SPDRs (01/63–12/93) and post-SPDRs (01/94–12/03) periods. Two strategies are used to measure the economic significance of the uncertain information hypothesis. Overall, we present evidence confirming the uncertain information hypothesis in the post-SPDRs period. However, we fail to convert the statistically significant gains observed into economic gains under a conservative approach. In addition, the degree of difference in the volatilities of the 5-day post-event returns (in both the S&P 500 and the SPDR) among the three subgroups diminishes in the post-SPDR period. Hence, we conclude that the market is in fact short-term efficient in a more realistic setting.

Journal

Review of Quantitative Finance and Accounting – Springer Journals

Published: Apr 18, 2009

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