Correlation between the Stock and Futures Markets by Timescale

An Alternative Approach To Investigating Lead-lag Relationships Between Stock And Stock Index Futures Markets

In the absence of market frictions, the cost of carry model of stock index futures pricing predicts that returns on the underlying stock index and the associated stock index futures contract will be perfectly contemporaneously correlated. Evidence suggests, however, that this prediction is violated with clear evidence that the stock index futures market leads the stock market. We argue that tra...

Stock Index Futures Trading and Volatility in International Equity Markets

We examine stock market volatility before and after the introduction of equity index futures trading in twenty-five countries, using various models that account for asynchronous data, conditional heteroskedasticity, asymmetric volatility responses, and the joint dynamics of each country’s index with the world market portfolio. We find that futures trading is related to an increase in conditiona...

Efficient Price Discovery in Stock Index Cash and Futures Markets

This study is concerned with the aggregation of information in stock index cash and futures markets. The efficient price discovery is analyzed with reference to the error correction representation and to the common trend representation of cointegrated variables. The empirical evidence is based on three month of intraday data on the French CAC 40 index. The results indicate that deviations from ...

Preliminary Inter-Temporal Volatility Spillovers and Price Dynamics Within and Between Spot and Futures Stock Markets

Formative studies have thoroughly examined causality within and between different spot and futures markets with a motivation to discover market co-movements, price leadership effects, and more recently, volatility spillovers across markets. However, the empirical framework within which this has been accomplished has neither analysed foreign spillover effects upon a spot / futures relationship n...

Price Discovery and Arbitrage between Futures and Cash Markets for Taiwan Stock Index