The lead-lag relationship between equities and stock index futures markets around information releases

Alex Frino*, Terry Walter, Andrew West

*Corresponding author for this work

Research output: Contribution to journalArticle

41 Citations (Scopus)


This paper documents a strengthening in the lead of stock index futures returns over stock index returns around macroeconomic information releases. Some evidence of a strengthening in feedback from the equities market to the futures market and weakening in the lead of the futures market around major stock-specific information releases is also provided. This is consistent with the hypothesis that investors with better marketwide information prefer to trade in stock index futures while investors with stock-specific information prefer to trade in underlying stocks. A small weakening in the contemporaneous relationship between stock index futures returns and stock index returns around both types of releases is also documented. This is consistent with disintegration in the relationship between the two markets associated with noise induced volatility. One by-product of this study is new comparative evidence on the performance of adjustments for infrequent trading of index stocks based on a commonly used ARMA technique versus recalculation of the stock index using quote midpoints. The results suggest that the quote midpoint index performs at least as well as the ARMA adjusted index across the entire sample period, as well as around the different types of information releases.

Original languageEnglish
Pages (from-to)467-487
Number of pages21
JournalThe Journal of Futures Markets
Issue number5
Publication statusPublished - May 2000


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