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Empirical Evidence on Put-Call Parity in Australia: A Reconciliation and Further Evidence

Author

Listed:
  • R. L. Brown

    (The Department of Accounting and Finance, Monash University, Clayton VIC 3168.)

  • S. A. Easton

    (The Department of Accounting and Finance, Monash University, Clayton VIC 3168.)

Abstract

The results of the put-call parity studies by Loudon (1988) and Taylor (1990) are in direct conflict despite the authors reporting the use of virtually identical models and methods. Employing an improved version of Taylor's data collection procedures, we test the parity theorem in the period studied by Loudon. The results are similar to those of Loudon. As a result, we run separate checks of Taylor's data and analysis. The check of the data reveals that over sixty per cent of Taylor's observations are invalid. The check of the analysis reveals that the lower boundary of the put-call parity relation was incorrectly calculated by Taylor. Correcting this error results in fundamentally different conclusions.

Suggested Citation

  • R. L. Brown & S. A. Easton, 1992. "Empirical Evidence on Put-Call Parity in Australia: A Reconciliation and Further Evidence," Australian Journal of Management, Australian School of Business, vol. 17(1), pages 11-19, June.
    • Handle: RePEc:sae:ausman:v:17:y:1992:i:1:p:11-19
    DOI: 10.1177/031289629201700102
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    Cited by:

    1. Ardia, David, 2002. "Tests d'arbitrage et surfaces de volatilité : analyse empirique sur données haute fréquence [Arbitrage tests and surface of implied volatility: An empirical analysis of high frequency data]," MPRA Paper 17415, University Library of Munich, Germany.

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