The Impact of the Efficiency of the South African Share Index Futures Market on Hedging Effectiveness and Optimal Exposure Management over the Period 1987 to 1989

Abstract

An empirical investigation was undertaken to assess the impact of futures market efficiency on hedging effectiveness and optimal exposure management in the South African SIF market for the period June 1987 to December 1989. It was found that hedge performance in the market has remained on the same levels over the period. Results further suggest that optimal (risk-minimising) hedges are significantly affected by contract mispricings albeit in a manner not consistent enough to formulate general conclusions.