Tail wagging the dog?

[Scataphagos]

There must be a ton of research on this, but I haven't come across anything to answer below curiosity.

It seems to me that the market moves often start in the Future indices and then the stocks catch up. Maybe I'm seeing things, but I have a theory for why ...

Large players use Futures when they need to enter quickly with size. They move the Futures prices which causes the cash market to catch up.

Obviously, it could be the other way around if individual stock or sector jumps on news, but doesn't happen as often.

I know there are arbitrage strategies to keep the two markets in sync, but are there any studies that show which market leads - futures or cash?

Thanks

What you're observing is that futures reflect price changes almost instantly, but it takes a bit of time for the trades to be reflected on the tape... makes it look like futures lead, but neither does.

I don't believe there is any effective way for retail screen jockeys like us to arb this. (I tried several years ago, but no joy.)

 

[murray t turtle]

Seems? There are numerous studies that spooz lead the market, they are the most liquid and liquidity begets liquidity. Of course, you can't exploit it unless you have great tech.

%%
Well that worked well in 1987+ plenty of other times.....;
+no wonder it pays no dividends ,like SPY/ liquidity leader.
JAN up also leads/forecasts the market also; except in 1987......... LOL. JAN up[SPY] ;52 week forecast has worked about 80% -88%/+Thanks.,