Information Revelation in the Futures Market: Evidence from the Single Stock Futures Market

39 Pages Posted: 16 Mar 2006

See all articles by Kuldeep Shastri

Kuldeep Shastri

University of Pittsburgh - Finance Group

Ramabhadran S. Thirumalai

Indian School of Business

Chad J. Zutter

University of Pittsburgh

Date Written: August 26, 2006

Abstract

This paper analyzes 31 months of data on 137 single-stock futures (SSFs). The results indicate that SSFs contribute approximately 24 percent of the price discovery for underlying stocks. Information revelation in the SSFs market increases with the ratio (futures to stock market) of volumes, decreases with the ratio of spreads, and decreases with the volatility in the stock market. Moreover, the quality of the market for the underlying stocks improves substantially following the introduction of the SSFs market, with the largest improvement occurring on days with SSFs trading. Evidence also suggests that there exists both market- and security-level learning in the SSFs market which is associated with greater efficiency over time.

Keywords: futures market, price discovery, information share

JEL Classification: G12, G13, G14

Suggested Citation

Shastri, Kuldeep and Thirumalai, Ramabhadran S. and Zutter, Chad J., Information Revelation in the Futures Market: Evidence from the Single Stock Futures Market (August 26, 2006). Available at SSRN: https://ssrn.com/abstract=891708 or http://dx.doi.org/10.2139/ssrn.891708

Kuldeep Shastri

University of Pittsburgh - Finance Group ( email )

372 Mervis Hall
Pittsburgh, PA 15260
United States
412-648-1708 (Phone)
412-648-1693 (Fax)

HOME PAGE: http://www.pitt.edu/~ks112354

Ramabhadran S. Thirumalai

Indian School of Business ( email )

Gachibowli
Hyderabad, Andhra Pradesh 500 032
India
+91 (40) 2318 7151 (Phone)
+91 (40) 2300 7017 (Fax)

Chad J. Zutter (Contact Author)

University of Pittsburgh ( email )

352 Mervis Hall, Katz GSOB
University of Pittsburgh
Pittsburgh, PA 15260
United States
412-648-2159 (Phone)
412-648-1693 (Fax)

HOME PAGE: http://www.pitt.edu/~czutter/

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