Intraday return and volatility relationships between the Ibex 35 spot and futures markets

• Autores: Juan Ángel Lafuente Luengo
• Localización: Spanish economic review, ISSN 1435-5469, Vol. 4, Nº 3, 2002, págs. 201-220
• Idioma: alemán
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• Resumen

  • Abstract. This paper analyses the intraday lead-lag relationships between returns and volatilities in the Ibex 35 spot and futures markets. Using hourly data, we jointly analyze the interactions between markets, estimating a bivariate error correction model with GARCH perturbations which captures stochastically the presence of an intraday U-shaped curve for both spot and futures market volatility. Our findings show a bidirectional causal relationship between market volatilities, with a positive feedback. This two-way transmission of volatility is consistent with market prices evolving according to a long-run equilibrium relationship, and shocks affecting both markets in the same direction. Our empirical results also support a unidirectional cross interaction from futures to spot market returns. This pattern suggests that the futures market leads the spot market in order to incorporate the arrival of new information.