We show in a simple framework that momentum trading can exist in equilibrium and momentum trading is profitable. Properties of the model fit the empirics well. First, the model captures in a parsimonious manner both short-term overreaction and long-term reversals. Second, it predicts that...

This paper investigates how technical trading systems exploit the momentum and reversal effects in the S&P 500 spot and futures market. When based on daily data, the profitability of 2,580 technical models has steadily declined since 1960, and has been unprofitable since the early 1990s....

This paper investigates the lead-lag relationship in daily returns and volatilities between price movements of FTSE/ASE-20 futures and the underlying FTSE/ASE-20 cash index of the Athens Stock Exchange. The results suggest that there is a bidirectional causality between spot and futures returns,...

It has been almost a decade since the introduction of derivatives instruments in Indian bourses like Options and Futures trading replacing thereby age old Badla transactions and almost two decades since the introduction and implementation of liberalization, privatization and globalization...

In this paper we develop a general framework to analyze state space models with time-varying system matrices where time variation is driven by the score of the conditional likelihood. We derive a new filter that allows for the simultaneous estimation of the state vector and of the time-varying...

We show that at-the-money implied volatility of options on futures of 5-year Treasury notes (Treasury ‘yield implied volatility') predicts both the growth rate and volatility of gross domestic product, as well as of other macroeconomic variables, like industrial production, consumption, and...