On The Efficiency Of The Capital Market In Greece: Price Discovery And Causality In The Athens Stock Exchange And The Athens Derivatives Exchange

Abstract

The chapter examines the interactions, using high frequency data, between the price series of the share price index of futures contracts traded on the Athens Derivatives Exchange and the underlying spot asset - the FTSE/ASE-20 Index - in the Athens Stock Exchange. This allows conclusions to be drawn on the impact of market structure on informed trading and on the nature of the cost-of-carry model. The usual result of futures leading spot is rejected, with clear bi-directionalcausality, and with many significant lags. This suggests that an electronic market may enhance price discovery. However, price discovery is quite slow. Also, this suggests that there is no preferred market for informed trading in the environment, and that tests for the presence of arbitrage opportunities and the correctness of the cost-of-carry model may be ineffective unless the lag structure is taken into account.