Skip Navigation

This Article
Right arrow Full Text (PDF)
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Similar articles in ISI Web of Science
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrow Search for citing articles in:
ISI Web of Science (24)
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Dwyer, G. P.
Right arrow Articles by Yu, W.
Right arrow Search for Related Content
Related Collections
Right arrow G13 - Contingent Pricing; Futures Pricing
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

Rev Fin 1996; 9:301-332
© 1996 the Society for Financial Studies

Article

Index arbitrage and nonlinear dynamics between the S&P 500 futures and cash

GP Dwyer, Jr, P Locke and W Yu
Correspondence: GP Dwyer, Jr, Department of Economics, Clemson University, Clemson, SC 29634-1309, USA

Abstract

We use a cost of carry model with nonzero transaction costs to motivate estimation of a nonlinear dynamic relationship between the S&P 500 futures and cash indexes. Discontinuous arbitrage suggests that a threshold error correction mechanism may characterize many aspects of the relationship between the futures and cash indexes. We use minute-by-minute data on the S&P 500 futures and cash indexes. The results indicate that nonlinear dynamics are important and related to arbitrage, and suggest that arbitrage is associated with more rapid convergence of the basis to the cost of carry than would be indicated by a linear model.


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?




Disclaimer:
Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.