An investigation of the lead-lag relationship in returns and volatility between cash and stock index futures: the case of the CAC40 index

This paper investigates the lead-lag relationship in daily returns and volatilities between price movements of stock index futures and the underlying cash index in the CAC40 markets. Previous empirical results show that there is a long-run contemporaneous relationship, whith an asymetric lead-lag short-run behavior between the cash and futures markets. It seems that cash index returns lead futures by responding to shocks in futures market. After examining whether daily volatility in futures prices systematically lead daily volatility in the cash index, we show that there is a bi-directional volatility spillover effects between the two markets.