Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/211707 
Year of Publication: 
1994
Series/Report no.: 
Bank of Finland Discussion Papers No. 19/1994
Publisher: 
Bank of Finland, Helsinki
Abstract: 
The goal of the paper is to rationalize the observed persistent underpricing in the Finnish stock index futures market.It is shown that under a binding short-selling restriction on stocks the observed futures "underpricing" can be a result of strategic motives of the Finnish industrial and financial groups to hold large amounts of stocks, which implies a net futures demand for hedging part of the financial risk brought in by these strategic holdings."Underpricing" can also emerge under short-selling restrictions, if strategic investors are better informed than other traders.Two main empirical implications of the model - a negative relationship between the futures basis and stock index volatility and a positive relationship between the basis and private information signals received by informed investors - are supported by the Finnish data from May 1988 to December 1990.
Persistent Identifier of the first edition: 
ISBN: 
951-686-419-8
Document Type: 
Working Paper

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