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The Dynamics of Stock Index and Stock Index Futures Returns

Published online by Cambridge University Press:  06 April 2009

Hans R. Stoll  and
Robert E. Whaley
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Abstract

In rational, efficiently functioning markets, the returns on stock index and stock index futures contracts should be perfectly, contemporaneously correlated. This study investigates the time series properties of 5-minute, intraday returns of stock index and stock index futures contracts, and finds that S&P 500 and MM index futures returns tend to lead stock market returns by about five minutes, on average, but occasionally as long as 10 minutes or more, even after stock index returns have been purged of infrequent trading effects; however, the effect is not completely unidirectional, with lagged stock index returns having a mild positive predictive impact on futures returns.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 25 , Issue 4 , December 1990 , pp. 441 - 468
Copyright
Copyright © School of Business Administration, University of Washington 1990

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