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Time-varying information share and autoregressive loading factors: evidence from S&P 500 cash and E-mini futures markets

Author

Listed:
  • Yang Hou

    (University of Waikato)

  • Steven Li

    (RMIT University)

  • Fenghua Wen

    (Central South University)

Abstract

The error correction coefficients, known as the loading factors, are a key component for information share. To date, only constant loading factors have been considered for information share. This paper attempts to consider the autoregressive loading factors and their implications on the information share. Based on the minute-by-minute data from the S&P 500 cash and E-mini futures markets, this paper reveals that the loading factors are indeed autoregressive. Furthermore, we propose three AR(1) processes for the loading factors and assess their performance in information share compared to the constant loading factor model. Overall, this research provides supporting empirical evidence for using autoregressive loading factors for the information share measurement.

Suggested Citation

  • Yang Hou & Steven Li & Fenghua Wen, 2021. "Time-varying information share and autoregressive loading factors: evidence from S&P 500 cash and E-mini futures markets," Review of Quantitative Finance and Accounting, Springer, vol. 57(1), pages 91-110, July.
    • Handle: RePEc:kap:rqfnac:v:57:y:2021:i:1:d:10.1007_s11156-020-00940-7
    DOI: 10.1007/s11156-020-00940-7
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    More about this item

    Keywords

    Price discovery; Information share; S&P 500 E-mini futures; AGDCC GARCH; Loading factor; Error correction coefficient;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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