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- Title
Trading Behavior and Price Discovery during the S&P 500 Rollover.
- Authors
Tzu-Man Huang; Locke, Peter
- Abstract
We examine the rollover period of the S&P 500 futures contract to help identify informational effects associated with S&P 500 trading. This period is especially useful due to the need of some hedgers to roll their position forward. Our results show both trading volume and market makers jump from the nearby to the next-out contract seven calendar days before the nearby contract matures. We also find volatility rises dramatically in the nearby contract after it loses its lead status and its volume falls. For rollover spreads, the difference between selling in the next out and buying in the nearby is on average greater than the difference between buying in the next out and selling in the nearby. The nearby contract's price discovery leadership drops significantly on the redesignation date. When we look at high volume market makers' income, however, those market makers who specialize in trading the non-lead contract still earn a high return from trading the non-lead contract.
- Subjects
STANDARD &; Poor's 500 Index; STOCK price indexes; STOCK exchanges; ROLLOVERS (Finance); REINVESTMENT; MARKET volatility
- Publication
Quarterly Journal of Finance & Accounting, 2009, Vol 48, Issue 4, p5
- ISSN
1939-8123
- Publication type
Article