Study on price discovery process between stock index and stock index futures

This paper investigates the price discovery process between the stock index and the stock index futures by impulse respond test,information share model and the common factor decomposition model.The analysis includes the SP 500 stock indexes,Dow-Jones industrial average index,Hong Kong Hang Seng index,NIKKEI 225,Financial Times Stock Exchange 100 index.The result shows the price discovery primarily originates from the futures markets.With the development of futures markets,the futures markets play a more important role during the price discovery process.And the index futures market acts as the information(pricing) center between the two markets.