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Kalok Chan (1992)
A Further Analysis of the Lead–Lag Relationship Between the Cash Market and Stock Index Futures MarketReview of Financial Studies, 5
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In perfectly frictionless and rational markets, the prices of securities and security derivatives must simultaneously reflect new information. Othcrwise, costless arbitrage profits would be possible. In practice, however, frictions exist and trading costs differ across markets. Trading S&P 500 futures, for example, costs about 3% of the cost of trading an equivalent portfolio of index stocks. As a result, security and derivative prices may This research was supported by the Futures and Options Research Center and the Business Associates Fund at the Fuqua School of Business, Duke University. We gratefully acknowledge comments by Chris Kirby, Don MacDonald, Craig Mackinlay, and 'Tom Smith, as well as by seminar participants at Duke University, the University of Iowa, Rice University, Texas A&M University, the 1993 Western Finance Association meetings, and the 1994 Texas Finance Symposium. We thank Tim Rurroughs for providing the brokerage fee and exchange fee schedules for index derivatives. 1 Fleming is an Assistant Professor of Administrative Science at the Jones Graduate . 8 School of Administration, Rice University. rn Barbara Ostdiek is an Assistant Professor ojAdministrative Science at the Jones Gruduate School o Administration, Rice University. f Robert E. Whaley is the T. Austin Finch Foundation Professor o
The Journal of Futures Markets – Wiley
Published: Jun 1, 1996
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