Buradasınız

Anasayfa » Content

Intraday Lead/Lag Relationships between the Futures and Spot Market

Journal Name:

  • Eurasian Journal of Business and Economics

Publication Year:

  • 2012

Key Words:

Author NameUniversity of Author

AMS Codes:

Abstract (2. Language): 
This study investigates whether spot and futures markets are playing an important role in the assimilation of information and price discovery in the Indian stock market. For accomplishing this purpose, high frequency price data of 31 individual securities, observed at five minutes interval for the time period of April 2010 to March 2011 have been used. The present study applies the Johansen’s cointegration and Engle and Granger’s residual based approach to determine the long-run equilibrium between the two markets. Besides this, Granger causality test and VECM (Vector Error Correction Model) have been applied to determine the direction of causality and the leading market. The results of the study depict that there is a bi-directional information flows or feedback between the spot and futures markets in case of 30 securities and one security i.e. Wipro is showing unilateral relationship from spot to futures. As far as price discovery role of spot and futures markets is concerned, both markets are playing an important role implying that futures (spot) prices may contain useful information about spot (futures) prices. Besides this it is also evidenced that futures market is leading the spot market in case of 12 securities whereas 19 securities are being led by the spot market.
Bookmark/Search this post with
FULL TEXT (PDF): 
PDF icon lag-relationships-between-futures-and-spot-market.pdf
  • 9
165-186
  • English

REFERENCES

References: 

Alphonse, Pascal (2000). Efficient Price Discovery In Stock Index Cash And Futures Markets.
Annales d'Economie et de Statistique. Retrieved from:
http://annales.ensae.fr/anciens/n60/vol60-08.pdf as on August 13, 2010.
Asche, Frank & Guttormsen, Atle G. (2002). Lead-Lag Relationships between Futures and
Spot Prices. Working Paper no. 2/02. Retrieved from:
http://bora.nhh.no/bitstream/2330/898/1/A02_02.pdf as on July 25, 2010.
Aydemir, Ogujhan & Demirhan, Erdal (2009). The Relationship between Stock Prices and
Exchange Rates Evidence from Turkey. International Research Journal of Finance and
Economics. 23, 1-7.
Bose, Suchismita (2007). Contribution of Indian index futures to price formation in the stock
market. Money & Finance. Retrieved from: http://ssrn.com/abstract=1017477. 39-56 as on
July 20, 2010.
Brooks, Chris (2002), Introductory Econometrics for Finance (3rd ed.). Modeling Long-run
Relationships in Finance. 367-436.
Chan, K (1992). A further analysis of the lead-lag relationship between the cash market and
stock index futures market. Review of Financial Studies. 5 (1), 123-152.
Debashish, Sathya Swaroop & Mishra, Bishnupriya (2008). Econometric Analysis of Lead-Lag
Relationship betweeNSE Nifty and its Derivatives Contracts. Indian Management Studies
Journal. 12(2), 81-100.
Engle, Robert F. & Granger, C.W.G. (1987). Cointegration and Error Correction:
Representation, Estimation and Testing. Econometrica. 55 (2), 251-276.
Floros, Christos & Vougas, Dimitrios V. (2007). Lead-Lag relationship between Futures and
Spot Markets in Greece: 1999-2001. International Research Journal of Finance and
Economics. 7, 168-174.
Floros, Christos (2009). Price Discovery in South African Stock Index Futures Markets.
International Research Journal of Finance and Economics, Retrieved from:
http://www.eurojournals.com/irjfe_34_12.pdf as on July 29, 2010.
Kapil CHOUDHARY & Sushil BAJAJ
Frino, Alex & West, Andrew (1999). The Lead–Lag Relationship Between Stock Indices and
Stock Index Futures Contracts: Further Australian Evidence. Abacus: A Journal of Accounting,
Finance and Business Studies. 35 (3), 333-341.
Gujarati, Damodar N. & Sangeetha (2007). Basic Econometrics (4th ed.). Time Series
Econometrics: Some Basic Concepts, 811-839.
Gupta, Kapil & Singh, Balwinder (2006). Price Discovery through Indian Equity Futures
Market. The ICFAI Journal of Applied Finance. 12 (12), 70-83.
Jong, Frank De & Donders, Monique W.M. (1998). Intraday Lead-Lag Relationships Between
the Futures, Options and Stock Market. European Finance Review. 1(3), 337-359.
Kawaller, Ira G., Koch, Paul D. & Koch, Timothy W. (1987). The Temporal Price Relationship
between S&P 500 Futures and the S&P 500 Index. The Journal of Finance. 42 (5), 1309-1329.
Kutner, George W. & Sweeney, Robert J. (1991). Causality Tests between the S&P 500 Cash
and Futures Markets. Quarterly Journal of Business and Economics. Retrieved from:
http://www.questia.com/googleScholar.qst;jsessionid=E1E17F455C42EC9D0EB7...
042.inst3_2a?docId=5000129581 as on November 11, 2010.
Karmakar, Madhusdan (2009). Price Discoveries and Volatility Spillovers in S&P CNX Nifty
Future and its Underlying Index CNX Nifty. Vikalpa. 34 (2), 41-56.
Mahalik, Mantu Kumar, Acharya, Debashish & Babu, Suresh M. (2009). Price Discovery and
Volatility Spillovers in Futures and Spot Commodity Markets: Some Empirical Evidence from
India. Proceeding from: The Fourth Annual International Conference on Public Policy and
Management. Retrieved from: http://www.igidr.ac.in/pdf/publication/PP-062-10 pdf as on
October 29, 2010.
Mallikarjunappa, T. & Afsal, E.M. (2010). Price Discovery Process and Volatility Spillovers in
Spot and Futures Markets: Evidences of Individual Stocks. Vikalpa. 35 (2), 49-62.
Moonis, Shakeel (2009). An Empirical Study on the Relationship between Nifty Futures Index
Prices and Nifty Spot Prices at National Stock Exchange. Journal of Finance & Management.
Retrieved from:
http://www.indianjournals.com/ijor.aspx?target=ijor:abjfm&volume=1&issue...
2 October 30, 2010.
Mukherjee, Kedar Nath & Mishra, R.K. (2006). Lead-Lag Relationship and its Variation around
Information Release: Empirical Evidence from Indian Cash and Futures Markets. Posted on
Social Science Research Network (SSRN). Retrieved from:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=931098 as on October 25, 2010.
Pati, Pratap Chandra & Pradhan, Purna Chandra (2009). Information, Price Discovery and
Causality in the Indian Stock Index Futures Market. IUP Journal of Financial Risk
Management. 6 (3 & 4), 7-21.
Pok, Wee Ching (2007). Temporal causality of returns of index futures and stock markets:
Evidence from Malaysia. International Finance Review. 8, 263-288.
Pradhan, Kailash Chandra & Bhat, Sham K. (2009). An Empirical Analysis of Price Discovery,
Causality and Forecasting in the Nifty Futures Markets. International Research Journal of
Finance and Economics. Retrieved from: http://www.eurojournals.com/irjfe_26_07.pdf as
on November 2, 2010.
So, Raymond W. & Tse, Yiuman (2004). Price discovery in the Hang Seng Index Markets:
Index, Futures, and the Tracker fund. Journal of Futures Markets. 24 (9), 887-907.

Thank you for copying data from http://www.arastirmax.com