Reexamining the uncertain information hypothesis on the S&P 500 Index and SPDRs

Susana Yu, Joel Rentzler, Kishore Tandon

Research output: Contribution to journalArticle

6 Scopus citations

Abstract

This paper examines the uncertain information hypothesis on one major index and its corresponding exchange-traded fund: the S&P 500 Index and SPDRs in the pre-SPDRs (01/63-12/93) and post-SPDRs (01/94-12/03) periods. Two strategies are used to measure the economic significance of the uncertain information hypothesis. Overall, we present evidence confirming the uncertain information hypothesis in the post-SPDRs period. However, we fail to convert the statistically significant gains observed into economic gains under a conservative approach. In addition, the degree of difference in the volatilities of the 5-day post-event returns (in both the S&P 500 and the SPDR) among the three subgroups diminishes in the post-SPDR period. Hence, we conclude that the market is in fact short-term efficient in a more realistic setting.

Original languageEnglish
Pages (from-to)1-21
Number of pages21
JournalReview of Quantitative Finance and Accounting
Volume34
Issue number1
DOIs
StatePublished - 1 Jan 2010

Keywords

  • Market efficiency
  • Uncertain information hypothesis

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