Standard & Poor's 500 Index futures volatility and price changes around the New York Stock Exchange close

Article Abstract:

Movements in the Standard and Poor's futures market are significantly affected by the timing of the closure of the New York Stock Exchange (NYSE). The principal reason for this timing effect is the fact that the futures market closes 15 minutes after the NYSE. During this 15-minute period, volatility in the futures market drops sharply and tends to increase only towards the close of the market, leading to a U-shaped trading pattern after the close of trading at the NYSE. Research also shows that volatility in the futures market is highest on the close of trading on Fridays, and that in these last trading minutes the futures market exhibits price behavior that parallels the so-called weekend effect found in equities markets.

Securities and Commodity Exchanges, Securities Exchanges, Exchanges, Futures market, Futures markets, Securities listing, New York Stock Exchange Inc., Stock index futures

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Transactional risk, market crashes, and the role of circuit breakers

Article Abstract:

Two microstructural stock market models that illustrate how a market crash can arise are presented. The models demonstrate the relationship between transactional risk and trading volume. They suggest that large volume shocks can increase transactional risks and possibly even trigger a market crash. The models imply that a properly implemented circuit-breaker system may be used to improve the stock market's ability to deal with large volume shocks.

Models, Analysis, Stock exchanges, Walrasian model, Stock Market Crash, 1987, Program trading (Securities)

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