Lecture%2020 - See: Stoll, H. and R. Whaley, 1990,...

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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 Markets Volume 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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Unformatted text preview: See: Stoll, H. and R. Whaley, 1990, "The Dynamics of Stock Index and Stock Index Futures Returns," Journal of Financial and Quantitative Analysis 25,441-468. Chan, K., K.C. Chan and G.A. Karolyi, 1991, "Intraday Volatility in the Stock Index and Stock Index Futures Markets," Review of Financial Studies 4, 657-684. - Managed Futures do not beat the market. http://www.cbot.com/cbot/docs/782.pdf II Volatility Does futures trading increase the volatility in the underling asset? - Oct 1987 and portfolio insurance - Introduction of futures contracts increased the volatility of S&P 500 stocks See: Lawrence Harris S&P 500 Cash Stock Price Volatilities. Journal of Finance , Vol. 44, No. 5. (Dec., 1989), pp. 1155-1175....
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This note was uploaded on 04/12/2008 for the course ECON 435 taught by Professor Chabot during the Winter '08 term at University of Michigan.

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Lecture%2020 - See: Stoll, H. and R. Whaley, 1990,...

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