Price discovery in spot and futures markets: a reconsideration

Theissen, Erik

doi:10.1080/1351847x.2011.601643

Cited by 78 publications

(59 citation statements)

References 32 publications

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“…Specifically, he looks into the impact of foreign participation in both for several Asian economies and finds that foreign investors wishing to change their exposure do so by taking short-term positions in futures markets and then unwinding their futures positions in the subsequent period as they carry out desired changes in their long-term positions in the cash market. His findings corroborate those in Theissen (2012) showing that futures trading impacts cash prices. Zhong, Darrat, and Otero (2004) also find that the futures market serves an important price discovery function, but they also note that the introduction of futures trading has enhanced volatility in underlying cash markets.…”

Section: Literature Reviewsupporting

confidence: 81%

“…Theissen (2012), analyzing DAX cash and futures equity prices, finds that the futures market dominates price discovery; that is, returns in the cash market depend heavily on lagged returns in the futures market, but not vice versa. One important finding of Theissen (2012) is the presence of arbitrage opportunities that drive price discovery in the futures market, and which are in turn due to lower transaction costs. Richards (2005) adds another layer of analysis by considering the role played by various investor groups in the price discovery between cash and futures equity markets.…”

Section: Literature Reviewmentioning

confidence: 99%

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Price Discovery and Foreign Participation in the Republic of Korea's Government Bond Cash and Futures Markets

et al. 2015

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The authors are deeply indebted to Sungjin Park, Choong Won Park, and Eun Yeong Song for valuable research inputs and discussions during the course of the study. The authors also wish to thank the seminar participants at the Bank of Korea for the midterm review of this study in November 2014. The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Bank of Korea and the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. When reporting or citing this paper, the authors' names should always be stated explicitly. Terms of use: Documents in ASIAN DEVELOPMENT BANKADB and the Bank of Korea do not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB and the Bank of Korea in preference to others of a similar nature that are not mentioned.By making any designation of or reference to a particular territory or geographic area, or by using the term "country" in this document, ADB and the Bank of Korea do not intend to make any judgments as to the legal or other status of any territory or area.This work is available under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 IGO license (CC BY-NC-ND 3.0 IGO) http://creativecommons.org/licenses/by-nc-nd/3.0/igo/. By using the content of this publication, you agree to be bound by the terms of said license as well as the Terms of Use of the ADB Open Access Repository at openaccess.adb.org/termsofuse This CC license does not apply to non-ADB copyright materials in this publication. If the material is attributed to another source, please contact the copyright owner or publisher of that source for permission to reproduce it. ADB cannot be held liable for any claims arising as a result of your use of the material.Attribution-In acknowledging ADB and the Bank of Korea as the source, please be sure to include all of the following information: Author. Year of publication. Title of the material. © Asian Development Bank and the Bank of Korea. https://openaccess.adb.org. Available under a CC BY-NC-ND 3.0 IGO license.Please contact OARsupport@adb.org or publications@adb.org if you have questions or comments with respect to content, or if you wish to obtain copyright permission for your intended use that does not fall within ...

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Section: Literature Reviewsupporting

confidence: 81%

Section: Literature Reviewmentioning

confidence: 99%

Price Discovery and Foreign Participation in the Republic of Korea's Government Bond Cash and Futures Markets

et al. 2015

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“…This further presents findings that are contradictory to that of Hasbrouck (2003), Schlusche (2009), and Theissen (2012), while they are similar to the inferences made by Ivanov et al (2013) and Chou and Chung (2006). This further presents findings that are contradictory to that of Hasbrouck (2003), Schlusche (2009), and Theissen (2012), while they are similar to the inferences made by Ivanov et al (2013) and Chou and Chung (2006).…”

Section: Introductionsupporting

confidence: 57%

The impact of multilateral trading facilities on price discovery: Further evidence from the European markets

et al. 2019

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This study examines relative price discovery for three major European indices, FTSE, CAC, and DAX, their futures and exchange traded funds (ETFs) using the data on 5‐minute intraday transaction prices over a four‐year period. We computed both Hasbrouck (1995) information share with error bounds and Gonzalo and Granger's (1995) common factor weights approach. Gonzalo and Granger's (1995) common factor weights suggest the index futures contracts play a dominant role in price discovery in the CAC market: the CAC 40 index futures lead the price discovery and Lyxor CAC 40 ETFs serving the second resort for information transmission. This could be due to the less frequent trading of ETFs. More importantly, CAC40 under the Gonzalo & Granger (1995) test shows upper and lower error bounds in good range may be the main reason to drive for the meaningful results. In contrast, the upper and lower bounds estimated from the Hasbrouck (1995) are far distant for most cases. Finally, FTSE and DAX markets offer compelling evidence to show that ETFs lead price discovery and spots and futures follows.

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“…Compared with the spot market, the futures markets could more efficiently and sensitively absorb and transfer market signals. Namely, the prices of the EUA futures market could obviously guide the carbon quota prices in the spot markets, but the impacts due to the presence of arbitrage opportunity cannot be ignored during the price discovery process (Theissen, 2011). Using Vector Autoregressive (VAR) model, Koop and Tole (2013) studied the relationship between EUA futures/spot prices and CER spot prices and proved the presence of contemporary causality among these three variables, and found the EUA futures prices played a dominant role in promoting this causality (Koop and Tole, 2013).…”

Section: 21worldwide Research On Carbon Futures Marketsmentioning

confidence: 99%

“…Moreover, other studies are focused on the relationship between carbon spot prices and futures prices. Theissen (2011) used the error correction model to investigate the spot and futures prices in EU ETS and tested the discovering ability of EUA futures prices (Theissen, 2011). Compared with the spot market, the futures markets could more efficiently and sensitively absorb and transfer market signals.…”

Section: 21worldwide Research On Carbon Futures Marketsmentioning

confidence: 99%

Dynamic Simulation Analysis on EUA and CER Futures Prices at Two Phases of European Union Emission Trading Scheme

2016

Rev. Téc. Ing. Univ. Zulia

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Based on data from European Union Emission Trading Scheme (EU ETS) 2nd phase, 3rd phase, and outlier-free 3rd phase, we used Johansen test, vector error correction, pulse response function and variance decomposition to empirically compare the long-term equilibrium relationships as well as interactions of futures prices of two major EU ETS commodities: European Union Allowance (EUA) and Certified Emission Reduction (CER). We find long-term stable positive equilibrium relationship for EUA and CER futures prices at the 2nd phase, but at the 3rd phase, co-integration of full-sample data disappears, while a positive equilibrium relationship occurs after outlier exclusion, though weaker compared with the 2nd phase. The EUA futures prices at the 3rd phase after outlier exclusion are more sensitive to market changes, but due to the complication of uncertainty factors at the 3rd phase, the correction direction of CER futures prices is changed. EUA versus CER futures prices do not show strong linkage at the 2nd phase, and the guiding role of a certain price disappears.

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Price discovery in spot and futures markets: a reconsideration

Cited by 78 publications

References 32 publications

Price Discovery and Foreign Participation in the Republic of Korea's Government Bond Cash and Futures Markets

Price Discovery and Foreign Participation in the Republic of Korea's Government Bond Cash and Futures Markets

The impact of multilateral trading facilities on price discovery: Further evidence from the European markets

Dynamic Simulation Analysis on EUA and CER Futures Prices at Two Phases of European Union Emission Trading Scheme

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