Intraday Lead-Lag Relationship between Index Futures and Stock Index Markets: Evidence from Malaysia

Jude W. Taunson, and Mohd. Fahmi Bin Ghazali, and Minah Japang, and Abd. Kamal Bin Char, (2018) Intraday Lead-Lag Relationship between Index Futures and Stock Index Markets: Evidence from Malaysia. Journal of Modern Accounting and Auditing, 14 (10). pp. 561-569.

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Abstract

This paper investigates the lead-lag relationship between the stock index futures (known as FKLI) and its underlying index, the Kuala Lumpur Composite Index (KLCI) in the emerging Malaysian market. Using 15-second interval data, cross-correlation, and the partial adjustment model, we find a bi-directional asymmetric lead-lag relationship and that the KLCI’s lead over FKLI is much stronger. The evidence also suggests that the KLCI returns over-react to information, more so once thin trading effects are considered. Overall, the evidences suggest that traders prefer to exploit stock specific information in the underlying market despite the advantages of trading the index futures.

Item Type: Article
Uncontrolled Keywords: lead-lag relations, index futures, emerging market
Subjects: H Social Sciences > HG Finance
Divisions: FACULTY > Labuan Faculty of International Finance
Depositing User: MDM SITI AZIZAH IDRIS
Date Deposited: 12 Mar 2020 08:30
Last Modified: 12 Mar 2020 08:30
URI: http://eprints.ums.edu.my/id/eprint/25218

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