Single stock futures quotations as a forecasting tool for stock prices
Single stock futures quotations as a forecasting tool for stock prices

Summary/Abstract: One of the main functions of futures contracts, apart from risk management and boosting the efficacy of financial market, is forecasting future cash prices of the underlying instruments. According to the model of expectancy, quotations of futures contracts should be determined by the expected future prices of the underlying instruments. The aim of the study is to make the tests of quality of stock prices forecasts on the Warsaw Stock Exchange, based on quotations of single stock futures contracts. The research analyses the volume and direction of variation of stock prices forecasts from their empirical prices on the expiry dates (the size of underestimations and overestimations) and their formation over time. The period covered by the analysis is 2010–2013. The studies show that single stock futures quotations are not a good predictor of the cash prices of stocks on WSE and they should not be used for this purpose. In addition, investors who make the forecasts are influenced by the situation prevailing on the stock market. Both underestimation and overestimation of the forecasts can be explained also by different expectations of investors, that is speculators and hedgers (according to the theory of Keynes and Hicks).

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