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12/2010

 

DEPFID Working Papers - 12 / 2010 - Abstract

 

 

Intra-day anomalies in the relationship between U.S. futures

and European stock indexes

 

Alessandro Innocenti*   Pier Malpenga**   Lorenzo Menconi***   Alessandro Santoni****

 

 

The paper presents an empirical investigation of the intraday minute by minute relationship between the U.S. S&P 500 Index Futures and the three major European stock indexes (CAC 40, DAX-100, and FTSE 100). Data analysis shows that the well established positive correlation between futures and stock indexes extends to this specific cross-country case. The correlation is particularly strong in the opening and closing of the European markets, but decreases quickly and remarkably between 13:00 and 13:30 (CET time). This fall is interpreted as derived from the expected release of press communication from U.S. companies. While in U.S. futures traded volumes decrease until the announcements are made, in Europe the expectation of new information coming from U.S. affects indexes price sensitivity providing arbitrage opportunities, due to the imperfect international integration of financial markets.

 

 

Keywords: futures market, spot markets, intraday timing, market correlation, information processing

 

JEL Classification: F36, G14, G15

 

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*     University of Siena, Befinlab, LabSi

**    Leo Fund Managers

***   University of Siena, Corte dei Conti

****  University of Siena, Befinlab, LabsSi, Banca Monte dei Paschi di Siena

 

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Dipartimento di Politica Economica, Finanza e Sviluppo – Università di Siena