Programmed trading (index arbitrage)transfers changes in the futures markets to the stock market.

Question

Quizplus · Accepted Answer

Programmed trading or index arbitrage involves using advanced computer algorithms to profit from pricing discrepancies between the futures market and the stock market. As these algorithms respond to changes in the futures markets, they can cause corresponding changes in the stock market prices. Therefore, programmed trading can transfer changes in the futures markets to the stock market.

Programmed Trading (Index Arbitrage)transfers Changes in the Futures Markets to the Stock