Information and Noise in Financial Markets: Evidence from the E-mini Index Futures
نویسنده
چکیده
I examine the informational contributions and effects on transitory volatility of trades initiated by different types of traders in three actively traded index futures markets. The results show that trades initiated by exchange member firms account for more than 60% of price discovery during the trading day. These institutional trades appear to be more informative than trades of individual exchange members or off-exchange traders. I also find that off-exchange traders introduce more noise into the prices than do exchange members. My findings provide new evidence on the role of different types of traders in the price formation process. JEL Classification: G10, G14
منابع مشابه
Do Futures Lead Price Discovery in Electronic Foreign Exchange Markets?
Using intra-day data, this paper investigates the contribution to the price discovery of Euro and Japanese Yen exchange rates in three foreign exchange markets based on electronic trading systems: the CME GLOBEX regular futures, E-mini futures, and the EBS interdealer spot market. Contrary to evidence in equity markets and more recent evidence in foreign exchange markets, the spot market is fou...
متن کاملIntraday Price Formation in US Equity Index Markets
Preliminary draft Not for attribution Comments welcome Current drafts of this paper and the associated computer programs and data will be posted to my web site: All errors are my own responsibility. Abstract / Summary The market for US equity indexes has traditionally comprised floor-traded index futures contracts and the individual markets for the component stocks. This picture has been altere...
متن کاملVolatility of India’s Stock Index Futures Market: an Empirical Analysis
In recent years, the increasing importance of the futures market in the Indian financial markets has received considerable attention from researchers, academicians and financial analysts. This paper is an attempt to examine the time varying properties of volatility of India’s stock index futures market. The application of GARCH class models provides the evidence of the persistence of time varyi...
متن کاملInvestor Flows and the 2008 Boom/Bust in Oil Prices
This paper explores the impact of investor flows and financial market conditions on returns in crude-oil futures markets. I argue that informational frictions and the associated speculative activity may induce prices to drift away from “fundamental” values, and may result in booms and busts in prices. Particular attention is given to the interplay between imperfect information about real econom...
متن کاملLiquidity and hedging effectiveness under futures mispricing: international evidence
We analyze the hedging effectiveness of positions that replicate stock indexes using corresponding futures contracts through the application of a dynamic, stochastic hedging strategy proposed by Lafuente and Novales (2003). Conclusive gains do not emerge in any of the markets analyzed over the period considered, relative to the use of a constant unit hedge ratio. These findings are consistent w...
متن کامل