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The evolution of price discovery in us equity and derivatives markets

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  • Damien Wallace
  • Petko S. Kalev
  • Guanhua Lian

Abstract

This study considers the evolution of price discovery in the S&P 500 E‐mini futures and the corresponding exchange traded fund (SPY ETF) over the period January 2002 through December 2013. The study reports evidence that the E‐mini futures dominate price discovery at the beginning of the sample period. However, from 2007 onward both the SPY ETF and E‐mini futures contribute similar portions to the price discovery process. The level of price discovery is significantly influenced by volume measures and relative levels of transaction costs for both securities.

Suggested Citation

  • Damien Wallace & Petko S. Kalev & Guanhua Lian, 2019. "The evolution of price discovery in us equity and derivatives markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(9), pages 1122-1136, September.
    • Handle: RePEc:wly:jfutmk:v:39:y:2019:i:9:p:1122-1136
    DOI: 10.1002/fut.22019
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    Cited by:

    1. Doureige J. Jurdi, 2020. "Intraday Jumps, Liquidity, and U.S. Macroeconomic News: Evidence from Exchange Traded Funds," JRFM, MDPI, vol. 13(6), pages 1-19, June.
    2. Kuck, Konstantin & Schweikert, Karsten, 2023. "Price discovery in equity markets: A state-dependent analysis of spot and futures markets," Journal of Banking & Finance, Elsevier, vol. 149(C).
    3. Fernandez-Perez, Adrian & Miffre, Joëlle & Schoen, Tilman & Scott, Ayesha, 2023. "Do spot market auction data help price discovery?," Journal of Commodity Markets, Elsevier, vol. 31(C).
    4. Sanjay Sehgal & Neharika Sobti & Florent Diesting, 2021. "Who leads in intraday gold price discovery and volatility connectedness: Spot, futures, or exchange‐traded fund?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(7), pages 1092-1123, July.
    5. Dimpfl, Thomas & Schweikert, Karsten, 2023. "Information shares for markets with partially overlapping trading hours," Journal of Banking & Finance, Elsevier, vol. 154(C).

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