The effect of the introduction of Cubes on the Nasdaq‐100 index spot‐futures pricing relationship

Abstract

This paper examines the impact of the introduction of the Nasdaq‐100 Index Tracking Stock (referred to as Cubes) on the pricing relationship between Nasdaq‐100 futures and the underlying index. Observations obtained from tick‐by‐tick Nasdaq‐100 futures transactions and index value data support the hypothesis that the introduction of Cubes in March 1999 has led to improvements in the Nasdaq‐100 index futures pricing efficiency. Both the size and frequency of violations in futures price boundaries appear to be reduced. Furthermore, there appears to be an increase in the speed of the market response to observed violations. These results are attributed to the increased ease in establishing a spot Nasdaq‐100 index position after the introduction of the tracking stock. © 2002 John Wiley & Sons, Inc. Jrl Fut Mark 22: 197–218, 2002

Intraday pricing of ETFs and certificates replicating the German DAX index

“…Switzer et al (2000) find that positive mispricing of the Standard and Poor's 500 Index Futures Market was reduced when SPDRs were introduced. Kurov and Lasser (2002) examine the impact of the Nasdaq100 Index Tracking Stock (ETF) on the underlying futures. The effect of decimalization of ETFs is studied by Chou and Chung (2006).…”

The limits to stock index arbitrage: Examining S&P 500 futures and SPDRS

“…Kurov and Lasser (2002) use estimated transaction costs of 0.15, 0.20, 0.35, and 0.50% of the index value in their study of futures arbitrage opportunities. To arrive at reasonable estimates of transaction costs that are more representative of the market conditions that were in effect at the time of this study, the mean mispricing value is divided by the mean futures price for each month of the sample.…”

Exchange Traded Funds: History, Trading, and Research

“…Nonsynchronous prices do not explain the improved efficiency observed since the pattern is obtained both with daily and hourly data. As for the advent of Cubes, Kurov and Lasser (2002) work with one year of transaction data concerning the near maturity of Nasdaq-100 futures. Whatever the assumed transaction cost levels, both the size and frequency of deviations decrease once Cubes are traded.…”