Program Trading and the Behavior of Stock Index Futures Prices
This study examines intraday transaction data for S&P 500 stock index futures prices and the intraday quotes for the underlying index. The data indicate that the futures price changes are uncorrelated, and that the variability of these price changes exceeds the variability of price changes in the S&P 500 index. This excess variability of the futures over the index remains even after controlling for the nonsynchronous prices in the index quotes, which induces autocorrelation in the index changes. We advance and examine empirically two hypotheses regarding the difference between the futures price and its theoretical value: that this "mispricing" increases on average with maturity, and that it is path dependent. Evidence supporting these hypotheses is presented.
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: 3254 Steinberg Hall-Dietrich Hall, Philadelphia, PA 19104-6367|
Phone: (215) 898-7616
Fax: (215) 573-8084
Web page: http://finance.wharton.upenn.edu/~rlwctr/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:fth:pennfi:30-87. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel)
If references are entirely missing, you can add them using this form.