Authors: P. Joakim Westerholm; M.D. Mostafa Ahmed
Addresses: Discipline of Finance, The University of Sydney Business School, University of Sydney, NSW 2006, Australia ' Discipline of Finance, The University of Sydney Business School, University of Sydney, NSW 2006, Australia
Abstract: This paper investigates the contribution to price discovery provided by individual stock futures on the largest and most active stocks on the Nordic Exchanges, OMX. We find that particularly in the more actively traded future and stock pairs, share forwards are Granger causing underlying stock price changes. The Hasbrouck (1995) information share measure supports that prices are discovered in the individual stock futures. These results indicate that there must be liquidity and transaction cost related savings benefiting traders using individual share forwards, in addition to leverage.
Keywords: price discovery; individual stock futures; share forwards; success factors; stock price changes; liquidity; transaction costs; leverage.
International Journal of Bonds and Derivatives, 2013 Vol.1 No.1, pp.3 - 18
Available online: 25 Sep 2013 *Full-text access for editors Access for subscribers Purchase this article Comment on this article