Developing a trading rule from the FTSE-100 stock index futures contract: evidence in support of the EMH


Buckle, M.J., Thomas, S.H. and Clare, A.D. (1999) Developing a trading rule from the FTSE-100 stock index futures contract: evidence in support of the EMH. Journal of Business Finance and Accounting, 26, (1-2), 249-260. (doi:10.1111/1468-5957.00255).

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Original Publication URL: http://dx.doi.org/10.1111/1468-5957.00255

Description/Abstract

An extensive literature documents the predictability of both short and long horizon returns, over a wide range of sample periods, frequencies and markets. This predictability may represent weak form inefficiency, or it may be caused by a failure to account for a time-variation in risk. We develop statistically reliable ex ante models of the returns on the FTSE-100 stock index futures contract and test a simple trading rule based on the out-of-sample predictions from these models. We interpret the failure of our ex ante model to produce abnormal returns for a risk neutral investor as evidence in favour of the EMH. Our trading rule results clearly suggest that we should be careful in interpreting such ex ante models as evidence of financial market inefficiency.

Item Type: Article
ISSNs: 0306-686X (print)
Related URLs:
Subjects: H Social Sciences > HG Finance
Divisions: University Structure - Pre August 2011 > School of Management
ePrint ID: 37361
Date Deposited: 23 Apr 2007
Last Modified: 27 Mar 2014 18:23
URI: http://eprints.soton.ac.uk/id/eprint/37361

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