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Market Architecture and Nonlinear Dynamics of Australian Stock and Futures Indices
Author(s) -
Anderson Heather M.,
Vahid Farshid
Publication year - 2001
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/1467-8454.00141
Subject(s) - futures contract , financial economics , economics , stock index futures , index (typography) , futures market , database transaction , stock market index , transaction cost , forward market , stock market , econometrics , business , microeconomics , computer science , paleontology , horse , world wide web , biology , programming language
This paper studies the All Ordinaries Index in Australia, and its futures contract known as the Share Price Index. We use a new form of smooth transition model to account for a variety of nonlinearities caused by transaction costs and other market/data imperfections, and given the recent interest in the effects of market automation on price discovery, we focus on how the nonlinear properties of the basis and returns have changed, now that floor trading in the futures contract has been replaced by electronic trading.