Intraday Price Formation in U.S. Equity Index Markets

Joel Hasbrouck

Journal of Finance, 2003, vol. 58, issue 6, 2375-2400

Abstract: The market for U.S. equity indexes presently comprises floor‐traded index futures contracts, exchange‐traded funds (ETFs), electronically traded, small‐denomination futures contracts (E‐minis), and sector ETFs that decompose the S&P 500 index into component industry portfolios. This paper empirically investigates price discovery in this environment. For the S&P 500 and Nasdaq‐100 indexes, most of the price discovery occurs in the E‐mini market. For the S&P 400 MidCap index, price discovery is shared between the regular futures contract and the ETF. The S&P 500 ETF contributes markedly to price discovery in the sector ETFs, but there are only minor effects in the reverse direction.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:58:y:2003:i:6:p:2375-2400

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