文档介绍：Program Trading and
Intraday Volatility
Lawrence Harris
University of Southern California
e Sofianos
James E. Shapiro
New York Stock Exchange, Inc.
Program trading and intraday changes in the S&P
500 Index are correlated. Future prices and, to a
lesser extent, cash prices lead program trades.
Index arbitrage trades are followed by an imme-
diate change in the cash index, which ultimately
reverses slightly. No reversal follows nonarbitrage
trades. The cumulative index changes associated
with buy-and-sell trades and with arbitrage and
nonarbitrage trades all are similar. Price -
positions suggest that the results are not due to
microstructure effects. Program trades in this
1989-1990 sample do not seem to have created
major short-term liquidity problems. The results
are stable within the sample.
Many practitioners, regulators, and men-
tators have expressed concerns about potential desta-
bilizing effects of program trading. They argue that
program trades–especially index arbitrage pro-
grams–increase intraday volatility and decrease
The mechanism typically hypothesized is
We thank Joe Kenrick, Randy Mann, and Deborah Sosebee for their contri-
butions to this article and to our understanding of how program trades are
reported to the NYSE. We are also especially thankful to the editor Chester
Span and the anonymous referee for their suggestions and encouragement.
ments and opinions contained in this article are those of the authors
and do not necessarily reflect those of the directors, members, or officers of
New York Stock Exchange, Inc. Address correspondence to Lawrence Harris,
School of Business Administration, University of Southern California, Los
Angeles, CA 90089-1421.
1 Birinyl Associates, for example, routinely attribute stock price volatility to pro-
gram trading; for one instance see New York Times March 6, 1992, p. C6.
The Review of Financial Studies Winter 1994 Vol. 7, No. 4, pp. 653-685
© 1994 The Revi