Efficient Price Discovery in Stock Index Cash and Futures Markets
نویسنده
چکیده
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 the equilibrium relationship linking cash and futures prices originate mainly from information arrivals in the futures markets and induce stock price adjustments related to information transmission from the futures to the spot. Inspection of the contribution of each market to the price discovery suggests that at least 95 percent of the price discovery is actually achieved in the futures market. Finally, the results appear relatively independent of the particular choice of price measurement, transaction prices versus quotes.
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