The Dynamics of Stock Index and Stock Index Futures Returns

Abstract

In rational, efficiently functioning markets, the returns on stock index and stock index futures contracts should be perfectly, contemporaneously correlated. This study investigates the time series properties of 5-minute, intraday returns of stock index and stock index futures contracts, and finds that SP however, the effect is not completely unidirectional, with lagged stock index returns having a mild positive predictive impact on futures returns.