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The October 1987 S&P 500 Stock-Futures Basis

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  • Harris, Lawrence

Abstract

Five-minute changes in the S&P 500 Index and futures contract are examined over a ten-day period surrounding the October 1987 stock-market crash. Since nonsynchronous trading problems are severe in these data, new Index estimators are derived and used. The estimators use the complete transaction history of all five hundred stocks. Nonsynchronous trading explains part of the large absolute futures-cash basis observed during the crash. The remainder may be due to disintegration of the two markets. Even after adjustment for nonsynchronous trading, the Index displays more autocorrelation than does the futures and the futures leads the Index. Copyright 1989 by American Finance Association.

Suggested Citation

  • Harris, Lawrence, 1989. " The October 1987 S&P 500 Stock-Futures Basis," Journal of Finance, American Finance Association, vol. 44(1), pages 77-99, March.
  • Handle: RePEc:bla:jfinan:v:44:y:1989:i:1:p:77-99
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    Cited by:

    1. Christoph Schmidhammer & Sebastian Lobe & Klaus Röder, 2016. "The day the index rose 11 %: a clinical study on price discovery reversal," Review of Quantitative Finance and Accounting, Springer, vol. 46(1), pages 79-106, January.
    2. Christoph Schmidhammer & Sebastian Lobe & Klaus Röder, 2016. "The day the index rose 11 %: a clinical study on price discovery reversal," Review of Quantitative Finance and Accounting, Springer, vol. 46(1), pages 79-106, January.
    3. Krause, Timothy & Tse, Yiuman, 2013. "Volatility and return spillovers in Canadian and U.S. industry ETFs," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 244-259.
    4. Bandi, F.M. & Renò, R., 2016. "Price and volatility co-jumps," Journal of Financial Economics, Elsevier, vol. 119(1), pages 107-146.
    5. Yarovaya, Larisa & Brzeszczyński, Janusz & Lau, Chi Keung Marco, 2016. "Intra- and inter-regional return and volatility spillovers across emerging and developed markets: Evidence from stock indices and stock index futures," International Review of Financial Analysis, Elsevier, vol. 43(C), pages 96-114.

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