Price discovery on the S&amp;P 500 index markets: An analysis of spot index, index futures, and SPDRs

Chu, Quentin C.; Hsieh, Wen-Liang; Tse, Yiuman

doi:10.1016/s1057-5219(99)00003-4

Cited by 137 publications

(107 citation statements)

References 26 publications

Supporting

Mentioning

100

Contrasting

Unclassified

Order By: Relevance

“…This concept has gained attention of various academicians and existing financial literature is discussed highlighting the pricing inefficiency of ETFs and magnitude of persistence in International markets. Chu et al (1999) examine the price discovery functions of S&P 500 index and its futures and ETFs (i.e., SPDRs). Their results show that these three prices also form an integrated system with a long-run stochastic trend; the main price adjustments are from the spot and the SPDRs markets, indicating that futures are in a dominant position in the price discovery process.…”

Section: Literature Reviewmentioning

confidence: 99%

Price discovery and dynamics of Indian equity exchange traded funds

Malhotra

Purohit

Tandon

2016

IJBCG

View full text Add to dashboard Cite

Abstract:The present study investigates the role of equity exchange traded funds (ETFs) in price discovery by studying a sample of nine equity ETFs following CNX Nifty and S&P BSE Sensex. The study reports an analysis based on the daily closing prices of ETFs and indices from the inception date of each ETF till December 2014. To examine the price discovery process, Johansen's cointegration test, vector error correction model (VECM), impulse response function and variance decomposition test are employed. The results depicts that both the ETF price series and index price series are non-stationary at levels but are stationary at first difference. Johansen cointegration test results reveal the existence of long term relationship for all ETFs except Most Shares M50. There is ample evidence to suggest that unidirectional causality between ETF prices and index prices. The results of VECM depicts that index prices lead the ETF prices and the presence of error-correction term restores the equilibrium in the long-run. The impulse response function results indicate that ETFs responds to index price variation and shock decay period ranges between two to three periods. The results underscores the role of ETFs in price discovery process and in India ETFs still behave as passive instruments for hedging purpose.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Price discovery and dynamics of Indian equity exchange traded funds

Malhotra

Purohit

Tandon

2016

IJBCG

View full text Add to dashboard Cite

show abstract

“…These problems affect both the proper preparation of the data, as well as adjusting methodology, which is expected to correspond to the nature of the phenomena examined. [Nieto et al, 1998], [Chen, Zheng, 2008], [Green, Joujon, 2000]; 1-hour [Gwilym, Buckle, 2001]; 15-minutes [Gosh, 1993], [Hodgson et al, 2006], [Cheung, Ng, 1999]; 5-minutes [Stoll, Whaley, 1990], [Chiang, Fong, 2001], [Frino, West, 1999], [Abhyankar, 1998]; 1-minute [Dwyer et al, 1996], [Kawaller et al, 1988], [Pizzi et al, 1998]; tick-by-tick [Chu et al, 1999], [Fung, Jiang, 1999];…”

Section: Specific Features Of Vecm Modeling In Case Of Spot and Futurmentioning

confidence: 99%

Some Aspects of Application of VECM Analysis for Modeling Causal Relationships Between Spot and Futures Prices

Marcinkiewicz

2014

Optimum

View full text Add to dashboard Cite

SummaryThe article is devoted to the issue of the application of econometric concept of cointegration and error correction models (VECM) to study the relationship between futures prices and spot prices. The author attempted to identify the determinants of the use of this methodology with respect to the relationship of spot and futures prices. In case of the prices of futures contracts and their underlying instruments causal modeling is associated with the need to deal with the multiple problems resulting from the specific nature of this dependency. These problems affect both the proper preparation of the data, as well as adaptation of the methods to the nature of the investigated phenomena. The article also points out the possible interpretation of the results of the VECM analysis in the context of the theory related to spot and futures prices linkages.

show abstract

“…Despite the introduction of SPDRs, Chu, Hsieh and Tse (1999) show in a Vector Error Correction framework that price discovery still takes place on S&P 500 futures. SPDRs only make a small contribution to the common factor, but more so than the spot market.…”

Section: Etfs and Price Discoverymentioning

confidence: 99%

Exchange Traded Funds: History, Trading, and Research

Deville

2008

Handbook of Financial Engineering

View full text Add to dashboard Cite

Price discovery on the S&P 500 index markets: An analysis of spot index, index futures, and SPDRs

Cited by 137 publications

References 26 publications

Price discovery and dynamics of Indian equity exchange traded funds

Price discovery and dynamics of Indian equity exchange traded funds

Some Aspects of Application of VECM Analysis for Modeling Causal Relationships Between Spot and Futures Prices

Exchange Traded Funds: History, Trading, and Research

Contact Info

Product

Resources

About