Authors: Donald Lien, Ju Xiang
Addresses: College of Business, University of Texas – San Antonio, One UTSA Circle, San Antonio, TX 78249, USA. ' Chinese Academy of Finance, Central University of Finance and Economics, South College Road, Beijing, 100081, China
Abstract: We conduct efficiency test using the conventional method in Chordia et al. (2005) and the wavelet analysis. For the FTSE-100 futures data from January 2001 through December 2004, both approaches identify that, conditional on order imbalance, it takes about ten minutes for the market to converge to efficiency, which is shorter than the 30-minute required for large US stocks. Similar to the stock market case, the conventional method produces a longer-term moment puzzle that short-term (ten-minute) unpredictability cannot prevent a longer-term (30-minute) return momentum. This puzzle is resolved when the wavelet analysis is applied.
Keywords: market efficiency; FTSE 100 futures; moment puzzle; wavelets.
International Journal of Financial Markets and Derivatives, 2010 Vol.1 No.3, pp.243 - 257
Published online: 30 Jul 2010 *Full-text access for editors Access for subscribers Purchase this article Comment on this article