Trading System and Market Integration
22 Pages Posted: 1 Feb 1997
Date Written: November 1996
In this paper we empirically investigate the impact of the trading system on the integration of markets. Our data set consists of intraday quotes of screen traded stock index futures and two stock index price series. One index series results from stock prices determined in a floor trading system while the other is based on screen traded stocks. Two main results are obtained: First, futures and spot prices move together more closely when both instruments are screen traded. Second, the observed discrepancy in market integration cannot be attributed to differences in arbitrage trading.
JEL Classification: G15, G20
Suggested Citation: Suggested Citation