Market Architecture and Nonlinear Dynamics of Australian Stock and Future Indices

Heather Anderson and Farshid Vahid

No 3/01, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: This paper studies the All Ordinaries Index in Australia, and its futures contract known as the Share Price Index. We use a new form of smooth transition model to account for a variety of nonlinearities caused by transaction costs and other market/data imperfections, and given the recent interest in the effects of market automation on price discovery, we focus on how the nonlinear properties of the basis and returns have changed, now that floor trading in futures contract has been replaced by electronic trading.

Keywords: Arbitrage; Electronic trading; Mean reversion; Nonlinear error correction; Smooth transition models; Thresholds; Transaction Costs (search for similar items in EconPapers)
JEL-codes: C22 C23 E17 E37 G13 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2001-05
New Economics Papers: this item is included in nep-ets and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Market Architecture and Nonlinear Dynamics of Australian Stock and Futures Indices (2001)
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