Intraday relationships among index arbitrage, spot and future price volatility, and spot market volume: a transactions data test

Article Abstract:

Index arbitrage is where investors try and profit from the spread between spot and future market prices for stock indices. About 6% of daily dollar trading uses index arbitrage. The study examines daily transaction prices for Major Market Index future contracts and transaction prices for the 20 index shares for Aug 1, 1984 to Jun 28, 1985. It compares the volatility and relationship between index arbitrage and the market. Results show that an increase in arbitrage spread results in cash trading volume and cash price volatility. A volatile market results in a decrease in arbitrage spread.

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Vector autoregression or simultaneous equations model? The intraday relationship between index arbitrage and market volatility

Article Abstract:

A comparison between the vector autoregression and the simultaneous equations models for stock market behavior is made to find out which is better equipped for analyzing such factors as spot and futures price changes and arbitrage spreads. Results show that the former enjoys the advantage of being able to examine seemingly unobservable processes while the latter can generate invalid conclusions in instances where correlations are intricate.

Models, Futures, Autoregression (Statistics), Equations, Simultaneous, Simultaneous equations

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Tick size, the compass rose and market nanostructure

Article Abstract:

Research was conducted to examine the emergence of the compass rose without the use of a first order approximation. Phase portrait from chaos theory, in which the values of a time-series are plotted against their delayed values, was one of the methods employed in the study. Results demonstrate that within the microstructure exists a nanostructure that becomes visible only when the computations are performed without approximation.

Securities and Commodity Exchanges, Securities Exchanges, Stocks & Other Equity Securities, Usage, Stocks, Exchanges, Stock prices, Nonlinear theories, Time-series analysis, Time series analysis

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