Veröffentlichungen | Abstract

 

Short Selling, Unwinding, and Mispricing

in: The Journal of Futures Markets, Vol. 18 (1998), S. 903-923

Prof. Dr. Alexander Kempf [University of Cologne]

 

Abstract:

This paper highlights the impact of short selling restrictions and early unwinding

opportunities on the relation between futures and spot prices. Within a multiperiod

equilibrium model, the influence of optimal arbitrage trading on the mispricing

is analyzed. Among others, optimal arbitrage trading is shown to lead to path

dependent mispricing and persistent undervaluation of futures contracts. The

hypotheses of the model are tested using intraday data. Results concerning

level, mean reversion and path dependence of the mispricing are provided.

The empirical evidence suggests that short selling restrictions and early

unwinding opportunities are very influential factors for the mispricing behavior.