TY - JOUR T1 - Price Discovery and Liquidity Characteristics for U.S. Electronic Futures and ETF Markets JF - The Journal of Trading SP - 59 LP - 72 DO - 10.3905/jot.2017.12.2.059 VL - 12 IS - 2 AU - A. Senol Oztekin AU - Suchismita Mishra AU - Pankaj K. Jain AU - Robert T. Daigler AU - Sascha Strobl AU - Richard D. Holowczak Y1 - 2017/03/31 UR - https://pm-research.com/content/12/2/59.abstract N2 - Using high-frequency datasets, we examine price discovery and its determinants for equivalent instruments across futures markets, electronically traded exchange-traded funds (ETFs), and spot markets. We compare futures to ETFs—leveraged and unleveraged—for stock indexes, using both a normal period and the 2008 financial crisis. Yan and Zivot’s information leadership procedure is employed to determine which instrument dominates price discovery. We then examine the determinants and characteristics of the price discovery process using Hasbrouck’s sequential trading model for the price impact of large trades. We find that most price discovery occurs in the more liquid and highly leveraged futures market. Although liquidity declined in all markets during the financial crisis, the relative contribution of ETFs to price discovery increased. We also find that the information leadership shares of futures and ETFs depend on the ratio of the quoted percentage spread between futures and ETFs and the aggregate volatility occurring in these markets.TOPICS: Exchange-traded funds and applications, big data/machine learning, futures and forward contracts ER -