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Intra-day anomalies in the relationship between U.S. futures and European stock indexes

Author

Listed:
  • Alessandro Innocenti
  • Pier Malpenga
  • Lorenzo Menconi
  • Alessandro Santoni

Abstract

The paper presents an empirical investigation of the intraday minute by minute relationship between the U.S. S&P 500 Index Futures and the three major European stock indexes (CAC 40, DAX-100, and FTSE 100). Data analysis shows that the well established positive correlation between futures and stock indexes extends to this specific cross-country case. The correlation is particularly strong in the opening and closing of the European markets, but decreases quickly and remarkably between 13:00 and 13:30 (CET time). This fall is interpreted as derived from the expected release of press communication from U.S. companies. While in U.S. futures traded volumes decrease until the announcements are made, in Europe the expectation of new information coming from U.S. affects indexes price sensitivity providing arbitrage opportunities, due to the imperfect international integration of financial markets.

Suggested Citation

  • Alessandro Innocenti & Pier Malpenga & Lorenzo Menconi & Alessandro Santoni, 2010. "Intra-day anomalies in the relationship between U.S. futures and European stock indexes," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 1210, Department of Economic Policy, Finance and Development (DEPFID), University of Siena.
    • Handle: RePEc:usi:depfid:1210
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    More about this item

    Keywords

    futures market; spot markets; intraday timing; market correlation; information processing.;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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