✦ LIBER ✦

Price discovery and investor structure in stock index futures

✍ Scribed by Martin T. Bohl; Christian A. Salm; Michael Schuppli

Publisher: John Wiley and Sons
Year: 2011
Tongue: English
Weight: 244 KB
Volume: 31
Category: Article
ISSN: 0270-7314
DOI: 10.1002/fut.20469

No coin nor oath required. For personal study only.

✦ Synopsis

Abstract

Previous literature on price discovery in stock index futures and spot markets neglects the role of different investor groups. This study relates time‐varying spot‐futures linkages studied within a VECM‐DCC‐GARCH framework to changes in the investor structure of the futures market over time. Empirical results suggest that during the dominance of presumably uninformed private investors, the futures market does not contribute to price discovery. By contrast, there is evidence of information flows from futures to spot markets and a significant increase in conditional correlation between both markets as institutional investors' share in trading volume increases. We derive implications for the design of emerging futures markets. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark31:282–306, 2011

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