The thesis reviews the intraday and interday returns and volatilities at the three main Scandinavian stock indices, and whether it exists differences between these markets. Previous research document that the close-to-close returns the last decades are mainly positive due to the positive interday returns, whereas the intraday returns are negative. These differences are important for the investors, as it might prove profitable or unprofitable to hold positions in the financial markets at specific times during a day.
The thesis explores structural differences between the indices, and discuss whether these might offer explanations for the differing results. OSEBX yields a positive intraday return, and a interday return close to zero. In contrast, S30 and C20CAP yield a negative intraday return, and a positive interday return throughout the period. Further, we decompose the indices to investigate whether segments and industries prove to affect the overall performance. We find that size and segments offer explanations for the original findings at the indices. The thesis examines extensively the intraday and interday returns and volatilities for seasonality, the weekend- and holiday effect and the differences between individual trading days. We find seasonality, and a positive interday return after a weekend when omitting the holidays at all indices. We find various volatilities for different trading days, and based on this we elaborate whether options are over- or underpriced. The market incorporates a higher volatility when pricing options, which may be a result of low liquidity or not considering the various volatility. Based on the findings throughout the thesis we construct two trading strategies, where the thesis elaborates whether the findings are proof of market inefficiency. The strategies do not outperform the market, and this might prove market efficiency.
We find significant differences between OSEBX, S30 and C20CAP, which might be due to the structural differences and the composition of the indices. Even though the indices are different, the findings throughout the thesis indicate that these markets are efficient.
|Uddannelser||Cand.merc.aef Applied Economics and Finance, (Kandidatuddannelse) Afsluttende afhandling|