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Program trading and intraday volatility |
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| Authors: | Harris L; Sofianos G; Shapiro JE |
| Institution: | 1 School of Business Administration, University of Southern California, Los Angeles, CA 90089-1421, USA 2 New York Stock Exchange, Inc., USA z Corresponding author |
| Abstract: | Program trading and intraday changes in the S&P 500 Indexare correlated. Futures prices and, to a lesser extent, cashprices lead program trades. Index arbitrage trades are followedby an immediate change in the cash index, which ultimately reversesslightly. No reversal follows nonarbitrage trades. The cumulativeindex changes associated with buy-and-sell trades and with arbitrageand nonarbitrage trades all are similar. Price decompositionssuggest that the results are not due to microstructure effects.Program trades in this 1989-1990 sample do not seem to havecreated major short-term liquidity problems. The results arestable within the sample. |
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