The Lead‐Lag Relationship Between Cash and Stock Index Futures in a New Market

This paper investigates the lead‐lag relationship in daily returns and volatilities between price movements of the FTSE/ATHEX‐20 and FTSE/ATHEX Mid‐40 stock index futures and the underlying cash indices in the relatively new futures market of Greece. Empirical results show that there is a bi‐directional relationship between cash and futures prices. However, futures lead the cash index returns, by responding more rapidly to economic events than stock prices. This speed is much higher in the more liquid FTSE/ATHEX‐20 market. Moreover, results indicate that futures volatilities spill information over to the corresponding cash market volatilities in both investigated futures markets, but volatilities in the cash markets have no effect on the volatilities of futures markets. Overall, it seems that new market information is disseminated faster in the futures market compared to the stock market. This implies that the futures markets can be used as price discovery vehicles, providing further evidence that derivatives markets contribute to completing and stabilising capital markets in Greece. A further finding of this study is that futures volume and disequilibrium effects between cash and futures prices are important variables in the explanation of volatilities in cash and futures markets.     

Relative informational efficiency of cash,futures, and options markets: The case of an emerging market

We study the lead–lag relationships among the spot, futures, and options markets on Hong Kong’s Hang Seng Index (HSI). The young options market experiences thin trading, and the option returns lag the cash index returns. The more mature futures market experiences active trading. Yet its lead over the cash index appears to be less than the counterparts in other countries. A possible reason is the dominance of a few major stocks in the index; and these stocks have symmetric lead–lag relations with the futures. Furthermore, the informativeness of the non-lasting futures and options quotations seems to depend on the market maturity.     

Liquidity and the Law of One Price: The Case of the Futures-Cash Basis

Deviations from no‐arbitrage relations should be related to market liquidity, because liquidity facilitates arbitrage. At the same time, a wide futures‐cash basis may trigger arbitrage trades and, in turn, affect liquidity. We test these ideas by studying the dynamic relation between stock market liquidity and the index futures basis. There is evidence of two‐way Granger causality between the short‐term absolute basis and liquidity, and liquidity Granger‐causes longer‐term absolute bases. Shocks to the absolute basis predict future stock market liquidity. The evidence suggests that liquidity enhances the efficiency of the futures‐cash pricing system.     

INTRADAY MARKET BEHAVIOR AND THE EXTENT OF FEEDBACK BETWEEN S&P 500 FUTURES PRICES AND THE S&P 500 INDEX

In this study we empirically examine the intraday lead/lag relation between S&P 500 futures prices and the S&P 500 index, and whether daily market characteristics are associated with changes in the relation. We estimate daily Geweke measures of feedback and regress time series of these measures on daily price volatility and volume characteristics. Results indicate that the contemporaneous price relation is substantive and that measures of contemporaneous feedback are positively associated with the daily range of the futures price. The primary implication is that the relation between cash and futures prices becomes stronger as futures price volatility increases. As volatility increases, information is being impounded at a faster rate so that futures and equity markets operate more closely as one market. Large futures price moves, by themselves, are not responsible for breakdowns in the stock-futures price relation.     

The lead–lag relationship between the spot and futures markets in China

Based on daily and one-minute high-frequency returns, this paper examines the lead–lag dependence between the CSI 300 index spot and futures markets from 2010 to 2014. A nonparametric and non-linear method based on the thermal optimal path method is adopted. Empirical results of the daily data indicate that the lead–lag relationship between the two markets is within one day but this relationship is volatile since neither of the two possible situations (the futures leads or lags behind the spot market) takes a dominant place. Our results using the high-frequency data demonstrate that there is a price discovery in the Chinese futures market: the intraday one-minute futures return leads the cash return by 0–5 min regardless of the price trend of the market.     

A Note on International Portfolio Diversification with Short Selling

In this paper, the diversification benefits of using stock index futures are examined. Empirical evidence shows that traditional diversification in international equity markets does not produce a risk adjusted performance superior to the US market. An explanation for this result is that restrictions on short selling prohibit the best allocation of resources when overseas stock markets are riskier and have worse returns. However, when such restrictions are eased for short selling in index futures markets, investors are enabled to both allocate their investments more efficiently and to construct a superior portfolio.     

Effect of the ban on short selling on market prices and volatility

We examine the effects of the short‐selling ban, imposed by Australian regulators in the wake of the global financial crisis, on the trading of financial stocks. Our findings argue against commonly stated reasons for imposing short‐sale bans. We find no evidence that short‐sale restrictions provide support for stock prices or that they reduce volatility. Moreover, stocks subject to the short‐selling ban suffered a severe degradation in market quality. Controlling for the adverse effects of the financial crisis on markets, we show that short‐selling restrictions increase intraday volatility, reduce trading activity and increase bid–ask spreads.     

A further analysis of the lead-lag relationship between the cash market and stock index futures market

The intraday lead-lag relation between returns of the MajorMarket cash index and returns of the Major Market Index futuresand S&P 500 futures is investigated. Empirical results showstrong evidence that the futures leads the cash index and weakevidence that the cash index leads the futures. The asymmetriclead-lag relation holds between the futures and all componentstocks, including. those that trade in almost every five-minuteinterval. Evidence indicates that when more stocks move together(market-wide information) the futures leads the cash index toa greater degree. This suggests that the futures market is themain source of market-wide information.     

The Effect of Short Selling on Bubbles and Crashes in Experimental Spot Asset Markets

A series of experiments illustrate that relaxing short‐selling constraints lowers prices in experimental asset markets, but does not induce prices to track fundamentals. We argue that prices in experimental asset markets are influenced by restrictions on short‐selling capacity and limits on the cash available for purchases. Restrictions on short sales in the form of cash reserve requirements and quantity limits on short positions behave in a similar manner. A simulation model, based on DeLong et al. (1990) , generates average price patterns that are similar to the observed data.     

Intraday Lead-Lag Relationships Between the Futures-, Options and Stock Market

In rational, efficiently functioning and complete markets, returns on derivative and underlying securities should be perfectly contemporaneously correlated. Due to market imperfections, one of these markets may reflect information faster. The use of high-frequency data and the choice for a small unit time interval to measure these lead-lag relations comes at the cost of some or many missing observations, causing traditional estimators to either under- or overestimate covariances and correlations. We use a new estimator to estimate lead-lag relationships between the cash AEX index, options and futures. We find that futures returns lead both options and cash index returns by approximately 10 minutes. The relationship between options and the cash market is not completely unidirectional.     

DIVERGENCE OF OPINION AND LONG‐TERM PERFORMANCE OF INITIAL PUBLIC OFFERINGS

Miller's hypothesis posits that divergence of opinion can lead to asset overvaluation and subsequent long‐term underperformance in markets (such as initial public offerings [IPOs]) with restricted short‐selling. Consistent with this hypothesis, we find that early‐market return volatility, a proxy for divergence of opinion, is negatively related to subsequent IPO long‐term abnormal returns. This relation holds after accounting for other factors that previous studies suggest affect long‐term abnormal returns for IPOs (including another proxy for divergence of opinion). Moreover, we find that this relation is stronger in IPO markets than in non‐IPO markets (where short‐selling restrictions are less stringent), again consistent with Miller's hypothesis.     

On the Role of Futures Trading in Spot Market Fluctuations: Perpetrator of Volatility or Victim of Regret?

We examine the role of index futures trading in spot market volatility. We use the exponential generalized autoregressive conditional heteroskedasticity (EGARCH) approach to measure volatility, analyze causality and feedback relations between volatilities in the spot and futures markets, and test various hypotheses in the context of a multivariate model that incorporates other macrostate variables. Our empirical results suggest index futures trading may not be blamed for the observed volatility in the spot market. Rather, we find stronger and more consistent support for the alternative posture that volatility in the futures market is an outgrowth of a turbulent cash market. We use the regret (cognitive dissonance) theory to explain our results.     

Sequential information arrival in the Finnish stock index derivatives markets

This paper investigates the hypothesis of sequential information arrival in the Finnish stock index futures and options markets. With no short selling restrictions in the derivatives markets, no causality relationships between returns and trading volume are observed. However, by using the so-called call-put signal, based on call and put volumes, causality between returns and volume is found supporting the hypothesis of sequential information arrival. In addition, it is discovered that the increased volume in stock index options relative to index futures has significantly increased their importance in the intermarket price discovery process.     

Single Stock Futures as a Substitute for Short Sales: Evidence from Microstructure Data

Abstract:  We examine how the introduction of single-stock futures impacts short sale costs and short interest levels in the underlying spot market. We find that short selling in the underling securities declines, after futures are introduced, the cost of borrowing stock for short sales declines and the available unborrowed supply of lendable shares increases. These results are consistent with futures exchanges providing a low-cost substitute market for establishing short positions. Microstructure evidence also suggests that the lower cost and greater ease of short selling via futures markets draws informed traders from the spot market.     

The maturity effect of stock index futures: Speculation or carry arbitrage?

Using the implementation of trading restrictions on CSI 300 index futures market as a quasi-natural experiment, this paper examines the maturity effect of stock index futures and its determinants. The results show that the maturity effect changes from weakly positive to significantly negative after trading restrictions are implemented. We find that the change in the maturity effect is rooted in the speculative effect, which is measured by the time pattern of price sensitivity to information, while there is a lack of support for the carry arbitrage effect on the maturity effect of index futures. Our findings provide an opportunity to better understand volatility dynamics in the equity futures market.     

Short‐Horizon Return Predictability in International Equity Markets

This study measures the degree of short‐horizon return predictability of 50 international equity markets and examines how its variation is related to the indicators of equity market development. Two multiple‐horizon variance ratio tests are employed to measure the degree of return predictability. We find evidence that return predictability is negatively correlated with publicly available indicators of equity market development. Our cross‐sectional regression analysis shows that the per capita gross domestic product, market turnover, investor protection, and absence of short‐selling restrictions are correlated with cross‐market variations in return predictability.     

模糊厌恶下股指期货风险对冲策略设计及实证分析

投资者对股指期货与现货有着不同的模糊厌恶,本文首先将此假设条件引入带交易成本的Garleanu and Pederson (2013)投资模型中,并以指数基金对冲策略为例,构建了一个股指期货动态对冲的理论模型。与非对冲策略相比,基于上述模型设计的对冲策略投资绩效更好,动态最优成交额占目标交易额的比例更小,目标成交额对收益率预测因子的敏感性更大。借助上述模型,本文选取2010年4月至2021年6月的中国ETF指数基金和股指期货数据,并以2015年9月股指期货管理措施实施为界进行区间划分,实证研究发现:(1)中国A股市场的ETF投资组合进行股指期货对冲显著提升了投资绩效,但股指期货管理会削弱该作用;(2)投资绩效改善主要来源于交易成本的下降与目标成交额因子敏感性的提升,该机制受到股指期货管理的约束;(3)与Garleanu and Pederson (2013)、Zhang et al. (2017)相比,本文对冲策略保留“抗跌”特点的同时增加了“易涨”特性。本文研究结果表明,在当前大力发展机构投资者的背景下应不断丰富股指期货、股指期权产品谱系,降低股指期货交易成本并完善持仓约束。     

股指期货推出对中国股票市场波动性的影响研究——基于沪深300股指期货高频数据的实证分析

本文利用沪深300股指期货的高频数据,研究了股指期货推出对中国股票市场波动性的影响。结果表明:在股指期货合约交割日,总体上不存在到期日效应;在中长期,股指期货推出则确实增加了现货市场的波动,但随着时间的推移,这种影响在减小。另外,股指期货对现货市场波动起到引导作用,其冲击持续的时间更长、强度更大。本文政策含义在于,随着时间的推移,股指期货开始平稳有效运行,对现货市场起到重要引导和价格发现的作用,但由于股指期货的高投机性,加强对其监管仍然十分必要。     

Efficiency and the Bear: Short Sales and Markets Around the World

We analyze cross‐sectional and time‐series information from 46 equity markets around the world to consider whether short sales restrictions affect the efficiency of the market and the distributional characteristics of returns to individual stocks and market indices. We find some evidence that prices incorporate negative information faster in countries where short sales are allowed and practiced. A common conjecture by regulators is that short sales restrictions can reduce the relative severity of a market panic. We find strong evidence that in markets where short selling is either prohibited or not practiced, market returns display significantly less negative skewness.     

沪深300股指期货与现货市场的非线性信息溢出与价格发现功能研究

采用线性与非线性Granger因果检验、协整检验和VECM模型,研究了沪深300股指期货和现货市场的线性与非线性信息溢出,并检验了期货市场的价格发现功能发挥情况。研究结果显示:线性信息溢出方面,沪深300股指期货市场对现货市场只有线性均值信息溢出,现货市场对期货市场只存在线性方差信息溢出;非线性信息溢出方面,两个市场之间不存在非线性均值信息溢出,不过二者之间存在显著的非线性方差信息溢出;沪深300股指期、现货市场之间存在着长期均衡的关系,不过不同于成熟市场中期货市场在价格发现方面居于主导地位的结论,我国股指现货市场在价格发现方面占主导地位,而期货市场处于从属地位。