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Determinants of intraday price discovery in VIX exchange traded notes
Author(s) -
FernandezPerez Adrian,
Frijns Bart,
Gafiatullina Ilnara,
TouraniRad Alireza
Publication year - 2018
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/fut.21907
Subject(s) - price discovery , futures contract , market liquidity , economics , financial economics , econometrics , futures market , stock exchange , monetary economics , finance
This study investigates the intraday price discovery of the VIX short‐term futures ETN (VXX) and inverse VIX short‐term ETN (XIV) for the period January 3, 2012 to December 31, 2015. Using Hasbrouck's (1995) Information Share and Lien and Shrestha's (2014) Generalized Information Share, we document strong time variation in the contribution to price discovery of the direct and inverse notes. We find that trading costs and market liquidity are significant determinants of price discovery. We further document that the informational leadership of the XIV increases on days when the VIX increases and on days with negative stock market returns.