Intraday price discovery and volatility spillovers in an emerging market

Abstract

This paper extends the study of price discovery and volatility transmission between the cash and futures index prices in Athens Exchange by using a new high-frequency dataset. It also employs, for the first time in the Greek market, well-known techniques to examine the long-run relationships and the short-run dynamics between spot and futures prices. In sum, the error correction model estimations and the estimated information shares provide evidence in support of the leading role of the futures market in the price discovery process. Furthermore, our results suggest strong bi-directional dependence in the intraday volatility of both markets, refuting prior empirical findings. Finally, we show that the pricing efficiency of the futures contracts in Athens Exchange has improved over the last years, as we document fewer divergences from the no-arbitrage window.