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Is there a proxy for S&P 500 market/pricing inefficiency?

Discussion in 'Finance' started by Achyut, Oct 8, 2018.

  1. Achyut

    Achyut Guest

    I need a variable or tool which can proxy for S&P 500's inefficiency (whether pricing efficiency or market inefficiency). Initially, I intended to use CAPM and consider the difference in ex-post and ex-ante required rate of return as a proxy for inefficiency; however this does not seem to work as S&P 500 is itself a proxy for market.

    Exp.Return (SP5) = rf + beta(SP5)(Return on Market - rf) where, S&P500 = SP5

    Is there a way I can model market/price inefficiency of S&P500 (which will be my dependent variable) so that I can see the impact on S&P when a new financial product is introduced.

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