Lead-lag relationship between spot and futures stock indexes: Intraday data and regime-switching models
Vicent Aragó and
International Review of Economics & Finance, 2020, vol. 68, issue C, 269-280
This paper analyzes the impact of arbitrage opportunity changes on the price discovery process between the DAX30 index and the DAX30 index future within a short time scale. To this end, we use 5-min data, regime-switching models and the regime-dependent impulse response function. The results unveil the presence of nonlinearities in the cointegrating vector and the shortcomings of relying on linear assumptions. We also find that the presence of arbitrage opportunities alters the nature of the lead-lag dynamics: the more arbitrage opportunities, the greater the leading role of the futures market and the more pronounced the impact of unexpected shocks on prices.
Keywords: Regime-switching models; Arbitrage opportunities; Lead-lag relationship; Intraday data (search for similar items in EconPapers)
JEL-codes: G12 G13 G14 G15 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:68:y:2020:i:c:p:269-280
Access Statistics for this article
International Review of Economics & Finance is currently edited by H. Beladi and C. Chen
More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().