PurposeThe purpose of this study is to investigate the adaptive market hypothesis (AMH) for 21 major global market indices for the period 1998–2018. These market indices cover the 16 largest global financial markets.Design/methodology/approachQuantile-regression methodology is employed to examine the market efficiency of a large number of financial markets from America, Europe and the Asia–Pacific region.FindingsThe results show that the returns in higher quantiles are negatively autocorrelated, and those in lower quantiles are positively autocorrelated. This evidence is stronger for the tails of return distribution. The positive autocorrelation (momentum effect) suggests market underreaction, and the negative autocorrelation (reversal effect) suggests overreaction. Overall, market efficiency appears to be time-varying and conditioned to the state of the market.Originality/valueThis study offers considerable evidence in favor of the AMH, for a large number of financial markets. These markets are substantially different from each other in terms of geography, nature of operation and size of the economy. The results from this study would be helpful to the academics, regulators and practitioners interested in financial markets.

Access to this document was granted through an Emerald subscription provided by emerald-srm:448207 [] For AuthorsIf you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to assess the informational efficiency of S&P CNX Nifty index options in Indian securities market. The S&P CNX Nifty index is a leading stock index of India, consists of 50 most frequently traded securities listed on NSE. For the purpose, the study covers a period of six years from 4 June 2001 (the starting date for index options in India) to 30 June 2007. Design/methodology/approach -The informational efficiency of implied volatilities (IVs) has been tested vis-à-vis select conditional volatilities models, namely, GARCH(1,1) and EGARCH(1,1). The tests have been carried out for ''in-the-sample'' as well as ''out-of-the-sample'' forecast efficiency of implied volatilities. Findings -The results of the study reveal that implied volatilities do not impound all the information available in the past returns; therefore, these are indicative of the violation of efficient market hypothesis in the case of S&P CNX Nifty index options market in India. Practical implications -The finance managers, in Indian context, should rely on conditional volatility models (especially the EGARCH(1,1) model) compared to IV-based forecasts to predict volatility for the horizon of one week. The stock exchanges and market regulator (SEBI) need to take certain initiatives in terms of extending the short-selling facility and start trading of volatility index (VIX) to enhance the accuracy of IV-based forecasts. Originality/value -The paper addresses an issue which is still unexplored in the context of Indian securities market and in that sense makes an important contribution to literature on microstructure studies.

This study attempts to analyse one-day-ahead out-of-sample performance of the stochastic volatility model of Heston (SVH) in the Indian context. Also, the study compares the ex-ante performance of the SVH with that of a Two-Scale-Realised-Volatility (TSRV)-based Black-Scholes model (BS) using the liquidity-weighted performance metrics. For the purpose, we utilise the tick-by-tick data of the CNX Nifty index and options thereon, the most liquid equity options in the world in terms of the number of contracts traded 1. Additionally, the study compares the two models across subgroups based on the moneyness, volatility of the underlying and time-to-expiration of the options. The results establish that the SVH model is better than the BS model in pricing equity index options. Further, the SVH model appears to be superior across all the subgroups, for both call options and put options.

This paper examines the lower boundary conditions (LBCs) for the S&P CNX Nifty Index options in the Indian securities (options) market. In India, the option contracts on the index are European in nature, that is, they can be exercised only at The results demonstrate that the violation of the LBC is more frequent and pronounced in the case of call options than that of put options. This implies that there are arbitrage opportunities on account of violation of the LBC and is indicative of the inefficiency of the Indian options market. In this study, the results have been interpreted considering the problems of nonsimultaneity, dividends, bid -ask spread, and transactions cost; that is, we have tried to adhere to the real conditions prevailing in the market in order to enhance the authenticity of the findings. Although the test conducted is ex-post in nature, it does not essentially comment on the exploitability of abnormal profits suggested by mispricing (underpricing) signals. The results of the study that the options market is inefficient are more suggestive and indicative in nature than conclusive.

Options are the contracts which serve as a tool for risk hedging, price discovery, and better allocation of capital. The efficiency of an options market, i.e., the correctness of option prices denotes that it is working well at its well-identified functions (Ackert and Tian, 2000). In view of this, the efficiency of options market has been of equal interest to the academics as well as practitioners and a number of studies on efficiency of options market have been carried out across the globe in different options markets.The present paper attempts to assess the pricing efficiency of the S&P CNX Nifty index options in India by testing the Lower Boundary Conditions (LBCs) using futures prices instead of spot values. The methodology adopted essentially tests a joint market efficiency hypothesis of index options and index futures. This has been done in view of the fact that the use of futures markets helps in doing away with the short-selling constraint as futures can easily be shorted. And, it becomes a natural choice for analysis as the short-selling has been banned in the Indian securities market during the period under reference. Moreover, the use of futures markets, to a marked extent, helps in ensuring the exploitability of arbitrage opportunities when underlying asset is an index.The study covers a period of six years from June 4, 2001 (starting date for index options in India) to June 30, 2007. The major findings of the study are:• The put options market is more efficient than the call options market, given the existing market microstructure in India during the period under reference.• Another equally important finding is that the put options market showed an improvement in the pricing efficiency over the years whereas the call options market demonstrated a counterintuitive and adverse development. • However, the profit potential offered by highly traded opportunities both in the cases of call and put options seems to be unexploitable in the presence of transaction costs.• Moreover, the dearth of liquidity in the case of otherwise exploitable opportunities which carry higher profit potentials has been the main inhibiting factor to arbitrageurs.Therefore, in short, it is reasonable to conclude that majority of violations in call as well as put options could not be exploited on account of the existing market-microstructure in India during the period under reference (especially short-selling constraint that caused underpricing in futures to persist) and the dearth of liquidity in the options market. In other words, the revealed state of options pricing can be designated to the short-selling constraints and dearth of liquidity.