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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title Synthetic international equity investment
Organization Unit
  • Fabian Ackermann
  • Walter Pohl
  • Karl Schmedders
  • English
Institution University of Zurich
Series Name Social Science Research Network SSRN
Number ?
Date 2013
Abstract Text The first equity future was launced in 1982 on the S&P 500 index. The future market has grown enormously since then and in more liquid than the cash market in many countries. The analysis here proves that the future market is highly efficient in many perspectives. Transaction costs in futures are on average one third of those in the cash market. Arbitrage is hardly ever possible. As futures contain information about future dividends, they can be used to analyze the market estimation for dividends. Even this proves to be quite efficient, with an exception in 2008, where the market has either underestimated the subsequent dividends or increased risk aversion caused too low market values of future dividends. Withholding taxes cause a split between the future and cash market. For investors who cannot reclaim foreign withholding taxes, it is beneficiary for them to only invest in futures, as dividend earnings implied in the future price are not taxed.
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Other Identification Number merlin-id:8996
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