Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25521
Authors: 
Canto, Bea
Kräussl, Roman
Year of Publication: 
2007
Series/Report no.: 
CFS Working Paper 2007/20
Abstract: 
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.
Subjects: 
Intraday non-linearities
Dynamic Spillovers
Electronic Trading Systems
Price Discovery Process
Cost of Carry Model
Regime Switching Model
Vector Error Correction Mechanism
SETAR Model
JEL: 
G12
G14
G15
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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