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An investigation into aspects of market behaviour in UK financial futures markets. / Pornsawan, Evans
Swansea University Author: Pornsawan, Evans
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This thesis investigates a number of features of UK financial futures markets: (i) market microstructure through the context of the volume-maturity relationship of FTSEIOO futures (stock index futures), Long Gilt (bond futures) and Short Sterling (interest rate futures), (ii) domestic market linkage...
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This thesis investigates a number of features of UK financial futures markets: (i) market microstructure through the context of the volume-maturity relationship of FTSEIOO futures (stock index futures), Long Gilt (bond futures) and Short Sterling (interest rate futures), (ii) domestic market linkages through the impact of macroeconomic announcements on the lead/lag relationship between the stock index futures and its equity index, (iii) international market linkages through the transmission of arbitrage information, measured by the mispricing errors, of stock index futures across the UK, US and Australian market, and (iv) the market efficiency of the three UK financial futures contracts, including the impact of the introduction of an electronic trading on the efficiency. We found an inverse relationship between the maturity and traded volume of these futures contracts. However, observation of the relationship for various maturity horizons (the near, middle and far contract) reveals that the inverse relationship is contributed mainly by the middle contract trading. The study of the lead/lag relationship reveals a futures lead over the cash market of 50 minutes for the FTSEIOO. UK macroeconomic announcements are found to strengthen the futures lead by up to 5 minutes. The impact from bad news created by the announcements appears to strengthen the futures lead whereas good news causes a price lead from the cash market to the futures market instead. The study of the international market linkages reveals the existence of bi-directional transmission of mispricing errors of stock index futures across the countries under investigation. We found a spillover from the US market to the Australian market, but not to the UK market, and from the Australian market to the US market. Finally, the study of market efficiency indicates that all three UK futures markets under investigation are weak-form efficient.
School of Management