Testing Efficiency and the Unbiasedness Hypothesis of the Emerging Greek Futures Market

Abstract

This paper investigates the joint hypothesis of market efficiency and unbiasedness of futures prices for the FTSE-20 blue chip index futures contract. The FTSE/ATHENS STOCK EXCHANGE (ASE)-20 futures market is the first organized derivatives market established in Greece and its operation rests with the Athens Derivatives Exchange (ADEX) and the Athens Derivatives Exchange Clearing House (ADECH). The growing importance of this new market for both investors and the Greek capital market motivated this empirical examination of its efficiency, even though it is an emerging market with low liquidity, compared to other European developed futures markets, but strong growth rates. The Johansen cointegration procedure used to test the market efficiency shows that the joint hypothesis of market efficiency and unbiasedness in futures prices is rejected, indicating market inefficiency. This finding is consistent to earlier but limited studies in other European emerging futures markets, implying that, despite the significant role of an organized futures/derivatives market for a capital market and an economy more general, further necessary steps have to be taken in order to contribute to its efficiency.

Keywords: Market efficiency, Unbiasedness hypothesis, Athens Derivatives Exchange, FTSE/ASE-20 futures market

JEL Classification: G13, G14