Employing intraday data for futures and cash values for the S&P 500 over the 1993–1996 period, we attempt to characterize the lead–lag relationship between these two markets and their basis behavior. Our findings show evidence of pronounced futures leadership when markets are rising, with no feedback from the cash market. However, when markets are falling, futures leadership is less evident and significant feedback from the cash market is noted. We also provide evidence of a positive relationship between the basis and return volatility. We offer an explanation, based on trader selectivity, for the leadership-asymmetry and the basis–volatility relationship. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:649–677, 2002