The evolving nature of intraday price discovery in the Chinese CSI 300 index futures market

Qiang Liu and Gaoxiu Qiao ()
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Qiang Liu: Southwestern University of Finance and Economics
Gaoxiu Qiao: Southwest Jiaotong University

Empirical Economics, 2017, vol. 52, issue 4, No 17, 1569-1585

Abstract: Abstract This paper reports a study of the evolution of the intraday price discovery of the Chinese CSI 300 stock index futures, utilizing minute-by-minute data for the two consecutive periods of April 16, 2010–July 30, 2010 and August 2, 2010–June 15, 2011. Innovatively, the empirical analysis employs a no-arbitrage-based error correction model (ECM) between the index and the theoretical index implied by the futures’ price. It is found that futures followed the index in the first period, but evolved to lead the spot in the second period. Interestingly, however, futures led within 30 min of the spot’s opening in each trading day, even in the initial first period of the futures trading. Fortuitously, the ECM seems to yield reasonable estimates for the arbitrage cost.

Keywords: Intraday price discovery; CSI 300 stock index futures; Minute-by-minute data; Vector error correction model; Implied theoretical index price (search for similar items in EconPapers)
JEL-codes: G13 G14 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s00181-016-1115-3

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