The temporal price relationship between the stock index futures and the underlying stock index : evidence from Malaysia

Abdullah, Mahdhir, Nasir, Annuar Mohd., Mohamad, Shamsher, Aliahmed, Huson Joher and Hassan, Taufiq 2002, The temporal price relationship between the stock index futures and the underlying stock index : evidence from Malaysia, Pertanika journal of social science and humanities, vol. 10, no. 1, pp. 73-84.


Title The temporal price relationship between the stock index futures and the underlying stock index : evidence from Malaysia
Author(s) Abdullah, Mahdhir
Nasir, Annuar Mohd.
Mohamad, Shamsher
Aliahmed, Huson Joher
Hassan, Taufiq
Journal name Pertanika journal of social science and humanities
Volume number 10
Issue number 1
Start page 73
End page 84
Total pages 12
Publisher Universiti Pertanian Malaysia Press
Place of publication Serdang Selangor, Malaysia
Publication date 2002
ISSN 0128-7702
Keyword(s) stock index futures
lead and lag relationships
Summary The stock index futures was introduced in Malaysia in December 1995 with the launching of the futures contract on the Kuala Lumpur Stock Exchange Composite Index. Due to its recentness in the country, many issues pertaining to this equity derivatives instrument have not been explored. Thus, the development of stock index futures opens many opportunities for research in this area. This study examines the temporal relationship between the price of the Kuala Lumpur Stock Exchange Composite Index futures contract (FKLI) and its underlying stock index, the Kuala Lumpur Stock Exchange Composite Index (KLSE CI). The five-year period under study is split into three subperiods to observe the price co-movement pattern under different volatility levels. The study finds that futures market tends to lead the spot market by one day during the periods of stable market, and there is a mixed lead-lag relationship between the two markets during the period of highly volatile market.
Language eng
Field of Research 150205 Investment and Risk Management
HERDC Research category C1.1 Refereed article in a scholarly journal
Copyright notice ©2002, Universiti Putra Malaysia Press
Persistent URL http://hdl.handle.net/10536/DRO/DU:30024334

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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