Contract settlement specification and price discovery: Empirical evidence in Australia individual share futures market |
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| Authors: | Donald Lien Li Yang |
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| Institution: | a Department of Economics, University of Texas-San Antonio, 6900 North Loop 1604 West, San Antonio, TX 78249-0633, USA;b School of Banking and Finance, University of New South Wales, Sydney 2052, Australia |
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| Abstract: | This study applies Geweke J. Am. Stat. Assoc. 76 (1982) 304] measures of information flow and dependence between Australian individual share futures (ISF) contract and its underlying stock market to investigate whether the price discovery function of futures price has been enhanced after the switch of futures contracts from cash settlement to physical delivery. It is found that the spot market leads the futures market as the futures trading volume is rather small. Further tests suggest that the switch from cash settlement to physical delivery in the ISF contracts has reinforced the information flow from the spot market to the futures market. |
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| Keywords: | Individual share futures Australia Futures market |
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