Do futures lag or lead?

[themickey]

What is the relationship between the index futures and the index?
Do the futures influence the direction of the index or does the index have the weight behind it to dictate the futures moves - during regular trading hours.

My argument is the Indexes eg SP500 has control over the futures but a friend of mine insists the futures price has an influence over the index.
As an example he would say "the futures right now is dragging up the index".

I'm talking about DOW, SP500 & NASDAQ in particular.

Also at night, does the futures have much sway over the opening?

 

[themickey]

A lesbian once from Khartoom took a poofter up to her room.
They argued all night as to who had the right to do what with which to whom.

 

[JackRab]

Chicken / egg kinda story.

I think it's what drives the move is important to the lead or lag question. If there's stock specific news, than the index leads the future. If there's a broad market move, future leads the index.

 

[GonnaGetBanned]

Futures lead. Stocks keep futures honest.

 

[Buy1Sell2]

A lesbian once from Khartoom took a poofter up to her room.
They argued all night as to who had the right to do what with which to whom.

Unfunny and uncalled for.

 

[Buy1Sell2]

Cash rules futures.

 

[Sig]

What is the relationship between the index futures and the index?
Do the futures influence the direction of the index or does the index have the weight behind it to dictate the futures moves - during regular trading hours.

My argument is the Indexes eg SP500 has control over the futures but a friend of mine insists the futures price has an influence over the index.
As an example he would say "the futures right now is dragging up the index".

I'm talking about DOW, SP500 & NASDAQ in particular.

Also at night, does the futures have much sway over the opening?

There is microsecond level arbitrage between futures and the underlying stock baskets. Effectively for your purposes neither leads or lags the other.

 

[Scataphagos]

What is the relationship between the index futures and the index?
Do the futures influence the direction of the index or does the index have the weight behind it to dictate the futures moves - during regular trading hours.

My argument is the Indexes eg SP500 has control over the futures but a friend of mine insists the futures price has an influence over the index.
As an example he would say "the futures right now is dragging up the index".

I'm talking about DOW, SP500 & NASDAQ in particular.

Also at night, does the futures have much sway over the opening?

The real story is that neither "leads" nor "holds sway" over the other.

Price moves via buying/selling.

Futures reflect price changes almost instantly, so they appear to lead... indices a bit later.

Index price changes have to work their way "through the tape"... and get displayed with a bit of a lag because of the process.

If you're thinking there might be some kind of "advance info" or some arb opportunity in futures vs. cash, there isn't for us retail guys.

As for "overnight".... The overnight futures reflect changes in psychology in Asia and Europe while the US markets are closed. Any gap up/gap down experienced at the opening in the US is merely "catch up" from what moved foreign markets earlier.

 

[murray t turtle]

Cash rules futures.

%%
Well they sure do; paying cash dividends......

Futures can lead on overshooting !!...................... I like the NYSE also; but Chicago is good location diversification, i posted to CME, today, congrats.....

 

[themickey]

Thank you for all your answers, it was just a curiosity thing for me to know.
It appears I was in the misunderstanding that one or the other was significantly or predominantly pushing/pulling the other.
Appreciated.