Price Discovery and Investor Structure in Stock Index Futures
Abstract
Previous literature on price discovery in stock index futures and spot markets neglects the role of different investor groups. This study relates time-varying spot-futures linkages studied within a VECM-DCC-GARCH framework to changes in the investor structure of the futures market over time. Empirical results suggest that during the dominance of presumably uninformed private investors, the futures market does not contribute to price discovery. By contrast, there is evidence of information flows from futures to spot markets and a significant increase in conditional correlation between both markets as institutional investors' share in trading volume increases. We derive implications for the design of emerging futures markets.
Cite as
Bohl, M., Salm, C., & Schuppli, J. (2011). Price Discovery and Investor Structure in Stock Index Futures. Journal of Futures Markets, 31(3), 282–306.Details
Publication type
Research article (journal)
Peer reviewed
Yes
Publication status
Published
Year
2011
Journal
Journal of Futures Markets
Volume
31
Issue
3
Start page
282
End page
306
Language
English
ISSN
1096-9934
DOI