Date of Award

Winter 2001

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Program/Concentration

Business Administration-Finance

Committee Director

Mohammad Najand

Committee Member

Kenneth Yung

Committee Member

Vinod Agarwal

Abstract

The futures market is used extensively for price discovery, arbitrage, and hedging. Since their introduction in the 1980's, the stock index futures have also become an active market and a very important research area. Any additional knowledge to understand the underlying effects on the index will help both investors and researchers. In this study, I examine the role of informational flow from the world's major stock markets (British, French, German, Japanese) to the U.S. futures market in terms of forming expectations, and offer new insights regarding the informational efficiency of the futures markets in an intenational perspective. State space modeling is applied to the relationship between a foreign stock index and the Standard & Poor's futures index. This method tests for the best (in Granger causality sense) relationship among the variables. The results of this study provide first time evidence that there is significant and instantaneous information transmission between the U.S. futures markets and major world spot markets, causality running from foreign spot markets to the U.S. futures markets. The implication of this finding is that the active traders in the U.S. futures markets can improve their trading strategy and gain significant benefits by incorporating pricing behavior of major foreign spot markets.

DOI

10.25777/pkwa-yb68

ISBN

9780493565033,

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