Both authors from the University of Toronto. An earlier version of this paper was presented at the Financial Research Foundation Conference, Kingston, Ontario, 1982. The comments of the participants, especially J. Lakonishok and M. Rubinstein, are gratefully acknowledged. The authors wish to express their gratitude to John Amadio who, for the two long and painful years it took to construct the data tape, provided excellent technical assistance. The authors wish to thank both the Financial Research Foundation and the Social Science and Humanities Research Council for financial support, and the Toronto Stock Exchange for supplying the financial data. The technical assistance of Wendy Rotenberg is gratefully acknowledge.
Empirical Tests of Boundary Conditions for Toronto Stock Exchange Options
Article first published online: 30 APR 2012
1985 The American Finance Association
The Journal of Finance
Volume 40, Issue 2, pages 481–500, June 1985
How to Cite
HALPERN, P. J. and TURNBULL, S. M. (1985), Empirical Tests of Boundary Conditions for Toronto Stock Exchange Options. The Journal of Finance, 40: 481–500. doi: 10.1111/j.1540-6261.1985.tb04968.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
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.