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Price discovery in the German equity index derivatives markets
Author(s) -
Booth G. Geoffrey,
So Raymond W.,
Tse Yiuman
Publication year - 1999
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/(sici)1096-9934(199909)19:6<619::aid-fut1>3.0.co;2-m
Subject(s) - futures contract , index (typography) , equity (law) , price discovery , stock market index , economics , financial economics , stock index futures , german , capitalization weighted index , transaction cost , finance , stock market , computer science , geography , context (archaeology) , archaeology , world wide web , political science , law
This article examines the intraday price discovery process among stock index, index futures, and index options in Germany using DAX index securities and intraday transactions data. The three index securities contribute to a common factor, but the spot index and index futures have substantially larger information shares than index options. Moreover, the returns of the three index securities exhibit feedback effects, with futures being dominant. Because the trading costs of the futures appear to be the lowest of the three and those of the options to be the highest, the results are consistent with the transaction cost hypothesis. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 619–643, 1999