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Determinants of intraday price discovery in VIX exchange traded notes

Author

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  • Adrian Fernandez‐Perez
  • Bart Frijns
  • Ilnara Gafiatullina
  • Alireza Tourani‐Rad

Abstract

This study investigates the intraday price discovery of the VIX short‐term futures ETN (VXX) and inverse VIX short‐term ETN (XIV) for the period January 3, 2012 to December 31, 2015. Using Hasbrouck's (1995) Information Share and Lien and Shrestha's (2014) Generalized Information Share, we document strong time variation in the contribution to price discovery of the direct and inverse notes. We find that trading costs and market liquidity are significant determinants of price discovery. We further document that the informational leadership of the XIV increases on days when the VIX increases and on days with negative stock market returns.

Suggested Citation

  • Adrian Fernandez‐Perez & Bart Frijns & Ilnara Gafiatullina & Alireza Tourani‐Rad, 2018. "Determinants of intraday price discovery in VIX exchange traded notes," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(5), pages 535-548, May.
    • Handle: RePEc:wly:jfutmk:v:38:y:2018:i:5:p:535-548
    DOI: 10.1002/fut.21907
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    Cited by:

    1. Wei‐Han Liu & Jow‐Ran Chang, 2022. "What can inverse VIX contribute to an investment portfolio?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3791-3798, July.
    2. Oliver Entrop & Bart Frijns & Marco Seruset, 2020. "The determinants of price discovery on bitcoin markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(5), pages 816-837, May.
    3. Sebastian A. Gehricke & Jin E. Zhang, 2020. "Modeling VXX under jump diffusion with stochastic long‐term mean," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(10), pages 1508-1534, October.
    4. Lien, Donald, 2022. "Comparisons of Alternative Information Share Measures," Finance Research Letters, Elsevier, vol. 50(C).
    5. Xu, Ke & Chen, Yu-Lun & Yang, J. Jimmy, 2023. "Market uncertainty, persistent arbitrage-free violation, and price discovery in RMB market," International Review of Financial Analysis, Elsevier, vol. 90(C).
    6. Shrestha, Keshab & Naysary, Babak & Philip, Sheena Sara Suresh, 2023. "Price discovery in carbon exchange traded fund markets," International Review of Financial Analysis, Elsevier, vol. 89(C).

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