The lead-lag relationship between equities and stock index futures markets around information releases

✍ Scribed by Frino, Alex; Walter, Terry; West, Andrew

• Publisher: John Wiley and Sons
• Year: 2000
• Tongue: English
• Weight: 221 KB
• Volume: 20
• Category: Article
• ISSN: 0270-7314
• DOI: 10.1002/(sici)1096-9934(200005)20:5<467::aid-fut4>3.0.co;2-l

✦ Synopsis

to trade in underlying stocks. A small weakening in the contemporaneous relationship between stock index futures returns and stock index returns around both types of releases is also documented. This is consistent with disintegration in the relationship between the two markets associated with noise induced volatility. One by-product of this study is new comparative evidence on the performance of adjustments for infrequent trading of index stocks based on a commonly used ARMA technique versus recalculation of the stock index using quote midpoints. The results suggest that the quote midpoint index performs at least as well as the ARMA adjusted index across the entire sample period, as well as around the different types of information releases.