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Intraday Price Formation in U.S. Equity Index Markets

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  • Joel Hasbrouck

    (Stern School of Business, New York University)

Abstract

The market for U.S. equity indexes presently comprises floor-traded index futures contracts, exchange-traded funds (ETFs), electronically traded, small-denomination futures contracts (E-minis), and sector ETFs that decompose the S&P 500 index into component industry portfolios. This paper empirically investigates price discovery in this environment. For the S&P 500 and Nasdaq-100 indexes, most of the price discovery occurs in the E-mini market. For the S&P 400 MidCap index, price discovery is shared between the regular futures contract and the ETF. The S&P 500 ETF contributes markedly to price discovery in the sector ETFs, but there are only minor effects in the reverse direction. Copyright 2003 by the American Finance Association.

Suggested Citation

  • Joel Hasbrouck, 2003. "Intraday Price Formation in U.S. Equity Index Markets," Journal of Finance, American Finance Association, vol. 58(6), pages 2375-2400, December.
  • Handle: RePEc:bla:jfinan:v:58:y:2003:i:6:p:2375-2400
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