The Evolution of Price Discovery in US Equity and Derivatives Markets

41 Pages Posted: 22 Aug 2014 Last revised: 19 Nov 2014

See all articles by Damien G. Wallace

Damien G. Wallace

University of South Australia - UniSA Business School

Petko S. Kalev

La Trobe Business School

Guanghua Lian

University of South Australia - School of Commerce

Date Written: November 7, 2014

Abstract

This paper investigates changes in the price discovery portions for two popular securities based on the S&P 500 index, namely the S&P 500 E-mini futures and the SPDR Exchange Traded Fund (Ticker SPY) for the period Jan 2002 through Dec 2013. We show a significant change in the price discovery of these two securities over this period. The E-mini futures are dominant for price discovery until 2007, though on a steady decline. After 2007 the SPY ETF dominates the price discovery process.

Keywords: price discovery, exchange traded funds, futures

JEL Classification: G14

Suggested Citation

Wallace, Damien G. and Kalev, Petko S. and Lian, Guanghua, The Evolution of Price Discovery in US Equity and Derivatives Markets (November 7, 2014). 27th Australasian Finance and Banking Conference 2014 Paper. Available at SSRN: https://ssrn.com/abstract=2485022 or http://dx.doi.org/10.2139/ssrn.2485022

Damien G. Wallace (Contact Author)

University of South Australia - UniSA Business School ( email )

Adelaide, South Australia 5001
Australia

Petko S. Kalev

La Trobe Business School ( email )

Department of Economics and Finance
Donald Whitehead Building: Level 3, DWB313
Bundoora, Victoria 3086
Australia
+613 9479 6285 (Phone)
+613 9479 1654 (Fax)

HOME PAGE: http://www.latrobe.edu.au/business/about/staff/profile?uname=PKalev

Guanghua Lian

University of South Australia - School of Commerce ( email )

37-44 North Terrace
Adelaide SA 5000, South Australia 5001
Australia

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