A response surface analysis of critical values for the lead‐lag ratio with application to high frequency and non‐synchronous financial data

O’Neill, Michael; Rajaguru, Gulasekaran

doi:10.1111/acfi.12546

Cited by 2 publications

(1 citation statement)

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“…The LLR in levels can be interpreted as a longrun causal relation between SPVXSTR, ETPs and VIX, similar to the interpretation in our multivariate analysis above. We assess statistical significance at the 5% level using a simulation approach to generate critical values for the LLR (O'Neill and Rajaguru, 2020). This corresponds to the asymptotic value of ∼2.10, being the same level as in the Bollen et al (2017) study which also used high frequency ETP and SPVXSTR data.…”

Section: Lead-lag Relations Between Vix Futures Etps and Vixmentioning

confidence: 99%

Causality of price movements in VIX exchange-traded products and VIX futures contracts

O’Neill

Rajaguru

2023

JAL

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PurposeThe authors analyse six actively traded VIX Exchange Traded Products (ETPs) including 1x long, −1x inverse and 2x leveraged products. The authors assess their impact on the VIX Futures index benchmark.Design/methodology/approachLong-run causal relations between daily price movements in ETPs and futures are established, and the impact of rebalancing activity of leveraged and inverse ETPs evidenced through causal relations in the last 30 min of daily trading.FindingsHigh frequency lead lag relations are observed, demonstrating opportunities for arbitrage, although these tend to be short-lived and only material in times of market dislocation.Originality/valueThe causal relations between VXX and VIX Futures are well established with leads and lags generally found to be short-lived and arbitrage relations holding. The authors go further to capture 1x long, −1x inverse as well as 2x leveraged ETNs and the corresponding ETFs, to give a broad representation across the ETP market. The authors establish causal relations between inverse and leveraged products where causal relations are not yet documented.

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Section: Lead-lag Relations Between Vix Futures Etps and Vixmentioning

confidence: 99%