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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), pp. 249-260.

Record type: Article

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.

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Published date: 1999

Identifiers

Local EPrints ID: 37361
URI: http://eprints.soton.ac.uk/id/eprint/37361
ISSN: 0306-686X
PURE UUID: f9aa58cc-94ba-4ee4-8d44-78193c9b3638

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Date deposited: 23 Apr 2007
Last modified: 29 Sep 2017 02:55

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Contributors

Author: M.J. Buckle
Author: S.H. Thomas
Author: A.D. Clare

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