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The effect of the introduction of Cubes on the Nasdaq‐100 index spot‐futures pricing relationship
Author(s) -
Kurov Alexander A.,
Lasser Dennis J.
Publication year - 2002
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.2214
Subject(s) - futures contract , index (typography) , financial economics , stock market index , economics , econometrics , position (finance) , stock (firearms) , stock market , computer science , finance , geography , context (archaeology) , archaeology , world wide web
Abstract This paper examines the impact of the introduction of the Nasdaq‐100 Index Tracking Stock(referred to as Cubes) on the pricing relationship between Nasdaq‐100 futures and theunderlying index. Observations obtained from tick‐by‐tick Nasdaq‐100 futures transactionsand index value data support the hypothesis that the introduction of Cubes in March 1999 has led to improvementsin the Nasdaq‐100 index futures pricing efficiency. Both the size and frequency of violations in futuresprice boundaries appear to be reduced. Furthermore, there appears to be an increase in the speed of the marketresponse to observed violations. These results are attributed to the increased ease in establishing a spotNasdaq‐100 index position after the introduction of the tracking stock. © 2002 John Wiley &Sons, Inc. Jrl Fut Mark 22: 197–218, 2002