The Review of Economics and Statistics Vol. 75 No. 1 1993
Trading Mechanisms and Price Volatility: Spot Versus Futures
Abstract
This paper compares the volatility of spot prices with that of futures prices using two estimators of volatility--natural and temporal. Using intraday data of the Major Market Index and its futures prices, the author shows that the well-known U-shaped volatility patterns during the day are not necessarily due to trading mechanisms. The author also shows that, when a temporal estimator is substituted for a natural estimator, th e U-shaped patterns disappear in both the spot and futures markets. Th e author provides some reasons why a temporal estimator may add more information.
- DOI
- 10.2307/2109644
- Volume
- 75
- Issue
- 1
- Pages
- 175
- Sources
- crossref openalex