The authors gratefully acknowledge the assistance of Genesis Analytics in providing both financial and above all data support to the present project. The results were obtained for the South African Financial Services Board. The views expressed in this paper are those of the authors alone, and should not be taken to necessarily reflect those of either Genesis Analytics or the Financial Services Board in any form.
The present paper examines the link between South African stock index futures markets and the underlying stock market index over the 1960-98 period. Analysis proceeds by means of Johansen VECM and ARDL co-integration analysis. The paper finds strong evidence of the cost-of-carry arbitrage relationship between the two markets. We conclude that the futures market in South Africa is zero-arbitrage efficient even across the period of financial instability that characterised the 1997-98 period.