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International price relationship and volatility transmission between stock index and stock index futures

Author

Listed:
  • Ismail bin Ahmad
  • Fahmi bin Abdul Rahim

    (Faculty of Business Management Universiti Teknologi MARA Malaysia
    Faculty of Business Management Universiti Teknologi MARA Malaysia)

Abstract

This study investigates the international price relationship and volatility transmissions between stock index and stock index futures of Malaysia, Hong Kong and Japan. Vector Autoregression (VAR) GJR-GARCH model was applied to the nine years daily price. Japanese markets are the main information producer to the market price changes. International market interdependence only affected the domestic volatility transmission of spot and futures market in Hong Kong. Asymmetric effects exist in all markets and the volatility persistence in each market is high. Finally, the overall conditional correlation estimates for spot and futures markets are higher in the unrestricted model form compared to the restricted model form.

Suggested Citation

  • Ismail bin Ahmad & Fahmi bin Abdul Rahim, 2009. "International price relationship and volatility transmission between stock index and stock index futures," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 1(1), pages 61-75, April.
    • Handle: RePEc:uii:journl:v:1:y:2009:i:1:p:61-75
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    References listed on IDEAS

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    1. Hasan F. Baklaci & Ömür Süer & Tezer Yelkenci̇, 2018. "Price Linkages Among Emerging Gold Futures Markets," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 63(05), pages 1345-1365, December.
    2. Jasman Tuyon & Zamri Ahmad, 2018. "Behavioural Asset Pricing Determinants in a Factor and Style Investing Framework," Capital Markets Review, Malaysian Finance Association, vol. 26(2), pages 32-52.

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    More about this item

    Keywords

    spot-futures; lead-lags; volatility; VAR GJR-GARCH; Asian financial markets;
    All these keywords.

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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