Lecture 20 Futures: Empirical Survey Papers refrenced in this lecture have been posted on the website in a folder called “futures research”. I Market Integration: - Futures and cash (spot) markets appear to be very integrated No arbitrage opportunities Fair value equations do an excellent job of “pricing” futures. See Hung-Gay Fung, Wai K. Leung, Xiaoqing Eleanor Xu “Information Role of U.S. Futures Trading in a Global Financial Market” Journal of Futures MarketsVolume 21, Issue 11, 2001.Pages: 1071-1090 MacKinlay, A. and K. Ramaswamy, 1988, "Index Futures Arbitrage and the Behavior of Stock Index Futures Prices," Review of Financial Studies 1, 137-158. - “volatility spillovers” are common Information is quickly reflected in both markets Cash and future prices adjust to mispricing in minutes
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