The time difference effect of a measurement unit in the lead-lag relationship analysis of Korean financial market
AbstractThis paper investigates Korean financial markets for the study of market microstructure of price discovery in the KOSPI 200 stock index and its related derivatives markets using different time-interval price data. The Granger causality test and vector error correction model are used to analyze the empirical relationship between markets. The lead-lag relationship between the KOSPI 200 stock index and its derivatives markets can be supported by the trading cost hypothesis and leverage effect hypothesis. This paper also shows the congruent lead-lag results in various time-intervals, but as the time-interval becomes large, more information loss and spurious results are induced. The correlations among 1-minute data, 5-minute data, and 10-minute data are significant under a 1% significance level, however, in the case of 60-minute data, the correlations with any other time-interval data are not significant. The 60-minute data even have negative correlations with others. These results are consistent regardless of the raw data or the innovation data. Therefore, we can conclude that the previous research using the 60-minute data due to an insufficiency of trading volume can be biased considerably.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal International Review of Financial Analysis.
Volume (Year): 17 (2008)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/620166
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Manaster, Steven & Rendleman, Richard J, Jr, 1982. " Option Prices as Predictors of Equilibrium Stock Prices," Journal of Finance, American Finance Association, vol. 37(4), pages 1043-57, September.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Aroskar, Raj & Sarkar, Salil K. & Swanson, Peggy E., 2004. "European foreign exchange market efficiency: Evidence based on crisis and noncrisis periods," International Review of Financial Analysis, Elsevier, vol. 13(3), pages 333-347.
- Ajayi, Richard A. & Friedman, Joseph & Mehdian, Seyed M., 1998. "On the relationship between stock returns and exchange rates: Tests of granger causality," Global Finance Journal, Elsevier, vol. 9(2), pages 241-251.
- Hodgson, Allan & Masih, A. Mansur M. & Masih, Rumi, 2006. "Futures trading volume as a determinant of prices in different momentum phases," International Review of Financial Analysis, Elsevier, vol. 15(1), pages 68-85.
- Finucane, Thomas J., 1991. "Put-Call Parity and Expected Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 26(04), pages 445-457, December.
- Alexakis, Christos & Niarchos, Nikitas & Patra, Theopfano & Poshakwale, Sunil, 2005. "The dynamics between stock returns and mutual fund flows: empirical evidence from the Greek market," International Review of Financial Analysis, Elsevier, vol. 14(5), pages 559-569.
- Chan, Kalok & Chung, Y Peter & Johnson, Herb, 1993. " Why Option Prices Lag Stock Prices: A Trading-Based Explanation," Journal of Finance, American Finance Association, vol. 48(5), pages 1957-67, December.
- Stoll, Hans R. & Whaley, Robert E., 1990. "The Dynamics of Stock Index and Stock Index Futures Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 25(04), pages 441-468, December.
- Garbade, Kenneth D & Silber, William L, 1983. "Price Movements and Price Discovery in Futures and Cash Markets," The Review of Economics and Statistics, MIT Press, vol. 65(2), pages 289-97, May.
- Stephan, Jens A & Whaley, Robert E, 1990. " Intraday Price Change and Trading Volume Relations in the Stock and Stock Option Markets," Journal of Finance, American Finance Association, vol. 45(1), pages 191-220, March.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
- Anthony, Joseph H, 1988. " The Interrelation of Stock and Options Market Trading-Volume Data," Journal of Finance, American Finance Association, vol. 43(4), pages 949-64, September.
- Bhattacharya, Mihir, 1987. "Price Changes of Related Securities: The Case of Call Options and Stocks," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(01), pages 1-15, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.