The lead–lag relation between VIX futures and SPX futures

Christine Bangsgaard and Thomas Kokholm

Journal of Financial Markets, 2024, vol. 67, issue C

Abstract: We analyze the lead–lag relation between VIX futures and SPX futures. The two futures markets are weakly connected when market volatility is low. By contrast, when volatility is high, their prices are highly negatively correlated, with VIX futures leading SPX futures. However, the tightness of the lead–lag relation prevents the formation of profitable trading strategies in a setup that includes transaction costs. An analysis of the time variation in the lead–lag relation finds that an improvement in the relative liquidity of one market strengthens the lead of that market. Moreover, the hedging activities of market makers influence the lead–lag relation.

Keywords: Lead–lag relation; High-frequency data; Cross-correlation; Price discovery; VIX futures hedging; Cross-market activity (search for similar items in EconPapers)
JEL-codes: G11 G12 G13 G14 G23 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:67:y:2024:i:c:s1386418123000496

DOI: 10.1016/j.finmar.2023.100851

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