The effect of universal futures on opening and closing stock market price discovery

Patricia L. Chelley-Steeley, James M. Steeley*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


Purpose – On 29 January 2001, Euronext LIFFE introduced single security futures contracts on a range of global companies. The purpose of this paper is to examine the impact that the introduction of these futures contracts had on the behaviour of opening and closing UK equity returns.
Design/methodology/approach – The paper models the price discovery process using the Amihud and Mendelson partial adjustment model which can be estimated using a Kalman filter.
Findings – Empirical results show that during the pre-futures period both opening and closing returns under-react to new information. After the introduction of futures contracts opening returns over-react. A rise in the partial adjustment coefficient also takes place for closing returns but this is not large enough to cause over-reaction.
Originality/value – This is the first study to examine the impact of a single security futures contract on the speed of spot market price discovery.
Original languageEnglish
Pages (from-to)260-281
Number of pages22
JournalStudies in Economics and Finance
Issue number4
Publication statusPublished - 2011


  • market openings and closings
  • universal futures
  • United Kingdom
  • stock markets
  • single security futures
  • price discovery


Dive into the research topics of 'The effect of universal futures on opening and closing stock market price discovery'. Together they form a unique fingerprint.

Cite this