Empirical Tests of Boundary Conditions for Toronto Stock Exchange Options
- Full Text PDF
- Author(s): PAUL J. HALPERN, STUART M. TURNBULL
- Published: Apr 30, 2012
- Pages: 481-500
- DOI: 10.1111/j.1540-6261.1985.tb04968.x
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.