Electronic trading systems and intraday non-linear dynamics : an examination of the FTSE 100 cash and futures returns
- This paper focuses on dynamic interactions of equity prices among theoretically related assets. We explore the existence of intraday non-linearities in the FTSE 100 cash and futures indices. We test whether the introduction of the electronic trading systems in the London Stock Exchange in 1997 and in the London International Financial Futures and Options Exchange (LIFFE) in 1999 has eliminated the non-linear dynamic relationship in the FTSE 100 markets. We show that the introduction of the electronic trading systems in the FTSE 100 markets has increased the efficiency of the markets by enhancing the price discovery process, namely by facilitating the increase of the speed of adjustment of the futures and cash prices to departures of the mispricing error from its non-arbitrage band. Nevertheless, we conclude that the automation of the markets has not completely eliminated the non-linear properties of the FTSE 100 cash and futures return series. JEL Classification: G12, G14, G15
| Author: | Bea Canto, Roman KräusslORCiDGND |
|---|---|
| URN: | urn:nbn:de:hebis:30-44017 |
| Parent Title (German): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2007,20 |
| Series (Serial Number): | CFS working paper series (2007, 20) |
| Document Type: | Working Paper |
| Language: | English |
| Date of Publication (online): | 2007/04/30 |
| Year of first Publication: | 2007 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2007/04/30 |
| Tag: | cost of carry model; dynamic spillovers; electronic trading systems; intraday non-linearities; price discovery process; regime switching model |
| GND Keyword: | International Stock Exchange of the United Kingdom and the Republic of Ireland; International Financial Futures and Options Exchange; International Financial Futures Exchange; Wertpapierhandelssystem; Tagesgeschäft |
| Issue: | March 15, 2007 |
| HeBIS-PPN: | 187517622 |
| Institutes: | Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Licence (German): |  Deutsches Urheberrecht |
