Index Futures Market Efficiency And Arbitrage Opportunities: Evidence From The Ukrainian Futures Market

In this study the market efficiency of the Ukrainian index futures market is examined by testing the hypotheses of the absence of ex-post and ex-ante mispricings, rarity and transitoriness of arbitrage profits and the existence of the direct relationship between average absolute relative mispricing and the time to maturity. We find that the frequency of transaction boundary violations in the Ukrainian market is significantly lower than in the developing Polish market and is comparable to the matured MMI (American) market. The analysis of the upper-bound violations does not allow us to reject the hypothesis of the absence of arbitrage opportunities. On the other hand, lowerbound violations, which are generally much more difficult to exploit by investors, led to frequent and persistent profits for the early contracts, however, violations almost totally ceased to exist for more recent futures. Overall, taking into account the current state of affair in the Ukrainian futures market the hypothesis of the market efficiency cannot be rejected.