S&P 500 index option pricing inefficiency surrounding U.S. Federal Reserve meetings and economic uncertainty

Evans, C. F. (2019). S&P 500 index option pricing inefficiency surrounding U.S. Federal Reserve meetings and economic uncertainty. https://scholar.acadiau.ca/islandora/object/theses:3235

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Details:

Title

S&P 500 index option pricing inefficiency surrounding U.S. Federal Reserve meetings and economic uncertainty

Author
Evans, Colton F.
Call Number

LE3 .A278 2019

Date

2019

Supervisor

Davis, Andrew

Degree Grantor

Acadia University

Degree Name

Bachelor of Arts

Degree Level

Honours

Discipline

Economics

Affiliation

Economics

Abstract

Many researchers such as Galai (1977) have showed that option markets experience periods of inefficiency. Other researchers such as Gemmill (1991) have shown that these periods of inefficiency occur surrounding uncertain events like political elections. Federal Reserve policy meetings occur roughly every six weeks and frequently have uncertain outcomes over potential policy changes. This study uses option data between February 11th, 2005 and December 31st, 2011 to conduct multiple OLS regressions and robustness teststo determine if Federal Reserve meetings and economic uncertainty increase pricing inefficiency in option markets. Results show a statistically significant, although not economically significant, positive relationship between option market inefficiency, Federal Reserve meetings and economic uncertainty.

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The author retains copyright in this thesis. Any substantial copying or any other actions that exceed fair dealing or other exceptions in the Copyright Act require the permission of the author.

Permanent Link

https://scholar.acadiau.ca/islandora/object/theses:3235

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