The authors thank Tobias Böhm, Judith Lischewski, and an anonymous referee for useful comments and suggestions.
Price discovery and investor structure in stock index futures†
Article first published online: 26 MAY 2010
© 2010 Wiley Periodicals, Inc.
Journal of Futures Markets
Volume 31, Issue 3, pages 282–306, March 2011
How to Cite
Bohl, M. T., Salm, C. A. and Schuppli, M. (2011), Price discovery and investor structure in stock index futures. J. Fut. Mark., 31: 282–306. doi: 10.1002/fut.20469
- Issue published online: 13 JAN 2011
- Article first published online: 26 MAY 2010
- Manuscript Accepted: APR 2010
- Manuscript Received: DEC 2009
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. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark31:282–306, 2011