Prague Economic Papers 2016, 25(5):547-559 | DOI: 10.18267/j.pep.579

Short Sale and Index Futures Mispricing: Evidence from the Warsaw Stock Exchange

Edyta Marcinkiewicz
Department of Management, Lodz University of Technology, Lodz, Poland (edyta.marcinkiewicz@p.lodz.pl).

The study attempts to assess the effects of lifting short sale restrictions on the Warsaw Stock Exchange in terms of futures pricing efficiency. The approach implemented in the article involves evaluation and comparison of the mispricing series of the WIG20 index futures listed on the WSE, in a one-year time span before and after the regulatory change introduced in 2010. The results show that lifting short sale constraints has increased the efficiency of the Polish futures market. There was a decline both in the number of mispricing occurrences, and in the mean level and dispersion of deviations from the fair values, especially with regard to underpriced contracts series. The study reveals that, in contrast to the pre-event period, after the regulatory change the arbitrage opportunities were virtually absent for investors bearing the highest transaction costs.

Keywords: Warsaw Stock Exchange, cost-of-carry, short sale, futures mispricing
JEL classification: G12, G13

Published: January 1, 2016  Show citation

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Marcinkiewicz, E. (2016). Short Sale and Index Futures Mispricing: Evidence from the Warsaw Stock Exchange. Prague Economic Papers25(5), 547-559. doi: 10.18267/j.pep.579
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