Intraday relationships between volatility in S&P 500 futures prices and volatility in the S&P 500 index

Abstract

This paper examines the intraday relationships between the volatility of S&P 500 futures prices and the volatility of the S&P 500 index. We calculate variance measures for minute-to-minute price changes on a daily basis and across 30-minute intervals. The empirical results indicate that: (i) futures volatility is greater than index volatility, (ii) volatility increased for both futures prices and the index in absolute terms from 1984 through 1986, (iii) both futures and index volatility increased directly with futures trading volume, and (iv) index volatility was systematically greater during the first 30 minutes of trading each day than at other times. Granger tests, however, reveal no systematic pattern of futures volatility leading index volatility, or index volatility leading futures volatility.