Stock Futures of a Flawed Market Index
Author | : Kotaro Miwa |
Publisher | : |
Total Pages | : 28 |
Release | : 2018 |
ISBN-10 | : OCLC:1304489896 |
ISBN-13 | : |
Rating | : 4/5 (96 Downloads) |
Download or read book Stock Futures of a Flawed Market Index written by Kotaro Miwa and published by . This book was released on 2018 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: I present evidence that transactions of the stock futures of a flawed market index cause mispricing in individual stocks. In particular, I analyze whether stocks overweighted on the index are mispriced, especially when market movements driven by futures trading are observed. To detect such movements, I use a qualitative indicator based on daily stock market news and a quantitative indicator based on the intraday lead-lag relationship between the spot and futures markets. I find that overweighted stocks are overpriced (underpriced) when upward (downward) movements driven by futures trading are observed. By contrast, such mispricing is not observed for non-constituent stocks.