Dynamics of information leadership in the volatility complex with trading time changes: Evidence from VIX futures and VIX ETPs

We examine the effect of VIX futures' new trading hours on price discovery as these causal relations have not been investigated before and are consequential for regulators and practitioners involved in the VIX futures market. Our data include VIX futures and VIX ETPs for four different periods in which trading hours were changed. Employing three different measures of information share, we find that VXX ETN leads VIX futures in 2009 and 2010, while in 2011 and 2013, the ETPs' leadership varies depending on the exchange-traded product under consideration. Furthermore, in 2013 before the change of trading hours, the VIX futures contribute more to price discovery than they do after trading hours expansion. Less of the price discovery occurs from the exchange-traded products in the latter half of the trading period in 2010. OLS regression results of the determinants of price discovery as well as panel regression results show that the effect of volume and spread, which are the main determinants of price discovery in the prior literature, change significantly before and after futures trading hour expansions, for both VIX futures and ETPs.