REEXAMINING INTRADAY SIMULTANEITY IN STOCK INDEX FUTURES MARKETS

This note examines three empirical examples involving intraday dynamic relationships associated with stock index futures markets. Researchers often employ a vector autoregressive (VAR) model to analyze such high frequency transactions data. While such a model can provide useful information regarding the nature of causal priority inherent in the data, it is not the proper model to investigate the structural relationships of interest, because it omits the contemporaneous interaction. On the other hand, a VAR model specification which is altered to incorporate simultaneity may enable the data to reveal the structural relationships of interest.