Price discovery in German stock and futures markets

John Paul Broussard (Fairleigh Dickinson University, Department of Economics and Finance, Madison, USA)
G. Geoffrey Booth (Louisiana State University Department of Finance Baton Rouge, USA)
Otto Loistl (Institut für Finanzierung und Finanzmärkte Wirtschaftsuniversität, Austria)

Managerial Finance

ISSN: 0307-4358

Publication date: 1 April 1998


Compares the trading efficiency of electronic and open outcry futures markets. Argues that the difference between the German DAX (floor) and FDAX (electronic) markets is due to asset type, not to information processing speed. Describes the German trading environment, comparing trading data from 1992 to 1994. Shows that the returns for DAX are positively skewed and for FDAX negatively skewed and more volatile. From regression and Granger causality tests establishes a feedback relationship between the two markets, in which the spot market is slower to digest information than the futures market. Points out that the dominant DAX stocks are also traded electronically, so the means of trade is not the cause of the difference.



Paul Broussard, J., Geoffrey Booth, G. and Loistl, O. (1998), "Price discovery in German stock and futures markets", Managerial Finance, Vol. 24 No. 4, pp. 3-18.

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Copyright © 1998, MCB UP Limited

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