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Empirical Tests of Boundary Conditions for Toronto Stock Exchange Options
Author(s) -
HALPERN PAUL J.,
TURNBULL STUART M.
Publication year - 1985
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1985.tb04968.x
Subject(s) - stock exchange , database transaction , transaction cost , sample (material) , stock market , econometrics , empirical research , financial economics , economics , boundary (topology) , business , monetary economics , finance , computer science , statistics , mathematics , database , geography , mathematical analysis , chemistry , context (archaeology) , archaeology , chromatography
Using option and stock transaction data for the period 1978–1979, three issues were investigated: first, the conformance of observed prices to various boundary conditions; second, the evolution of the market over time, as the volume of trading and the number of listed options increased; and third, to test the efficiency of the market. It was found that violations did occur. Using a trading rule based on the signal of observed violations, the results suggest that even after transaction costs the market was inefficient over the sample period.