Market efficiency around the clock some supporting evidence using foreign-based derivatives

Market efficiency around the clock some supporting evidence using foreign-based derivatives This paper examines whether information across international markets is rationally incorporated into stock prices. We find that Japanese Nikkei index-based futures traded in the U.S. provide complete information about contemporaneous overnight Japanese returns. Moreover, existing cross-dependence between the U.S. and Japanese stock index returns is subsumed by the information content of the derivative securities. Our findings cast doubt on trading models based on irrational traders who either overreact or only partially adjust to movements in foreign stock markets. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economics Elsevier

Market efficiency around the clock some supporting evidence using foreign-based derivatives

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Publisher
Elsevier
Copyright
Copyright © 1995 Elsevier Ltd
ISSN
0304-405x
D.O.I.
10.1016/0304-405X(94)00822-I
Publisher site
See Article on Publisher Site

Abstract

This paper examines whether information across international markets is rationally incorporated into stock prices. We find that Japanese Nikkei index-based futures traded in the U.S. provide complete information about contemporaneous overnight Japanese returns. Moreover, existing cross-dependence between the U.S. and Japanese stock index returns is subsumed by the information content of the derivative securities. Our findings cast doubt on trading models based on irrational traders who either overreact or only partially adjust to movements in foreign stock markets.

Journal

Journal of Financial EconomicsElsevier

Published: Oct 1, 1995

References

  • After-hours stock prices and post-crash hangovers
    Neumark, David; Tinsley, P.A.; Tosini, Suzanne
  • Pricing cross-currency options
    Rumsey, John

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