Price Discovery in South African Financial Markets: Investigating the Relationship Between South Africa's Stock Index Futures Market and the Underlying Market

Johannes Fedderke and M Joao

Studies in Economics and Econometrics, 2001, vol. 25, issue 2, 1-24

Abstract: This paper investigates price discovery in the association between the South African stock index futures market and the underlying market. Employing an unstructured VAR on intraday data at the 2, 6, and 10 minute frequency for 1998, and end-of-day data for 1996-98, we find that futures markets lead spot markets. While precluding Fama informational efficiency, this does not preclude zero-arbitrage efficiency.

Date: 2001
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DOI: 10.1080/10800379.2001.12106311

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