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A Further Analysis of the Lead-Lag Relationship between the Cash Market and Stock Index Futures Market

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  • Chan, Kalok

Abstract

The intraday lead-lag relation between returns of the Major Market cash index and returns of the Major Market Index futures and S&P 500 futures is investigated. Empirical results show strong evidence that the futures leads the cash index and weak evidence that the cash index leads the futures. The asymmetric lead-lag relation holds between the futures and all component stocks, including those that trade in almost every five-minute interval. Evidence indicates that when more stocks move together (market-wide information) the futures leads the cash index to a greater degree. This suggests that the futures market is the main source of market-wide information. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Suggested Citation

  • Chan, Kalok, 1992. "A Further Analysis of the Lead-Lag Relationship between the Cash Market and Stock Index Futures Market," The Review of Financial Studies, Society for Financial Studies, vol. 5(1), pages 123-152.
    • Handle: RePEc:oup:rfinst:v:5:y:1992:i:1:p:123-52
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