Information in the cash market and stock index futures market.

摘要

The first part of the dissertation demonstrates how different market structures in the cash and futures market can affect the behavior of futures and cash index prices. Because of the different settings, while market makers in the cash market trade individual stocks, those in the futures market trade futures contracts (baskets of stocks). The model extends the rational expectations framework in Kyle (1985) and Admati and Pfleiderer (1988) to the stock and futures market. It is shown that futures prices are more volatile and less efficient in reflecting information than cash index prices. The model implies that the variance of future price changes is larger than that of cash index price changes. Even though price changes of individual stocks and futures are serially uncorrelated, cash index price changes are positively autocorrelated. It is also demonstrated that there is a larger incentive to collect market wide information, but a lower incentive to collect firm specific information in the futures market than in the cash market.; The second part of the dissertation examines the lead-lag relationship between the cash and futures prices of the Major Market Index (MMI) by employing transaction price data of the futures and component stocks. The results show that while past futures price changes predict cash index price changes, past cash index price changes also predict futures prices. The lead-lag pattern cannot be explained completely by nonsynchronous trading. First, the feedback from the futures market to the cash market seems to be larger than the reverse, and the relation also holds between futures prices and the most heavily traded stocks. Second, for those stocks which trade in almost every five-minute interval, their price changes can still be led by the futures for more than two intervals (ten minutes). The evidence indicates that when there are more stocks moving together (market wide information), futures prices lead cash index prices more, while the feedback from the cash market into the futures market remains the same. This suggests that the futures market is able to update market wide information faster than the cash market.