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Tests of non-linearity using LIFFE futures transactions price data

Tests of non-linearity using LIFFE futures transactions price data
Tests of non-linearity using LIFFE futures transactions price data
This paper presents and implements a number of tests for non-linear dependence and a test for chaos using transactions prices on three LIFFE futures contracts: the Short Sterling interest rate contract, the Long Gilt government bond contract, and the FTSE 100 stock index futures contract. While previous studies of high frequency futures market data use only those transactions which involve a price change, we use all of the transaction prices on these contracts whether they involve a price change or not. Our results indicate irrefutable evidence of non-linearity in two of the three contracts, although we find no evidence of a chaotic process in any of the series. We are also able to provide some indications of the effect of the duration of the trading day on the degree of non-linearity of the underlying contract. The trading day for the Long Gilt contract was extended in August 1994, and prior to this date there is no evidence of any structure in the return series. However, after the extension of the trading day we do find evidence of a non-linear return structure
1463-6786
167-186
Ap Gwilym, O.
dcad2393-1a8b-4088-8508-cdf45e40816d
Brooks, C.
91d99e42-37f5-4b2b-87a2-c3df0c926b5f
Clare, A.
a98c3503-c9fe-433f-8092-1d68c80f876c
Thomas, S.
0f83004b-179e-4b71-8374-25345d0e9dad
Ap Gwilym, O.
dcad2393-1a8b-4088-8508-cdf45e40816d
Brooks, C.
91d99e42-37f5-4b2b-87a2-c3df0c926b5f
Clare, A.
a98c3503-c9fe-433f-8092-1d68c80f876c
Thomas, S.
0f83004b-179e-4b71-8374-25345d0e9dad

Ap Gwilym, O., Brooks, C., Clare, A. and Thomas, S. (1999) Tests of non-linearity using LIFFE futures transactions price data. The Manchester School, 67 (2), 167-186. (doi:10.1111/1467-9957.00140).

Record type: Article

Abstract

This paper presents and implements a number of tests for non-linear dependence and a test for chaos using transactions prices on three LIFFE futures contracts: the Short Sterling interest rate contract, the Long Gilt government bond contract, and the FTSE 100 stock index futures contract. While previous studies of high frequency futures market data use only those transactions which involve a price change, we use all of the transaction prices on these contracts whether they involve a price change or not. Our results indicate irrefutable evidence of non-linearity in two of the three contracts, although we find no evidence of a chaotic process in any of the series. We are also able to provide some indications of the effect of the duration of the trading day on the degree of non-linearity of the underlying contract. The trading day for the Long Gilt contract was extended in August 1994, and prior to this date there is no evidence of any structure in the return series. However, after the extension of the trading day we do find evidence of a non-linear return structure

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Published date: 1999

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Local EPrints ID: 37360
URI: http://eprints.soton.ac.uk/id/eprint/37360
ISSN: 1463-6786
PURE UUID: 15c8a878-5018-42db-b55c-2eea29f81fc0

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Date deposited: 25 Apr 2007
Last modified: 15 Mar 2024 07:58

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Contributors

Author: O. Ap Gwilym
Author: C. Brooks
Author: A. Clare
Author: S. Thomas

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