The causal relationship between stock index futures and cash index prices in Hong Kong

Gordon Y N TANG, Billy S C MAK, Daniel F.S. Choi

    Research output: Contribution to journalJournal articlepeer-review

    22 Citations (Scopus)

    Abstract

    The interrelationship between the Hang Sang index futures contracts traded in Hong Kong and the underlying Hang Sang index is investigated. Causal relationships between the variables are studied using the full-information estimation technique, Granger's definition of causality (Granger, C. W. J. (1969) Econometrica, 37, 424-38) and Hsiao's operational test (Hsiao, C. (1981) Journal of Monetary Economics, 7, 85-106). The results indicate that futures prices cause cash index prices to change in the pre-crash period but not vice versa. In the post-crash period, it is found that a bidirectional causality exists between the two variables.

    Original languageEnglish
    Pages (from-to)187-190
    Number of pages4
    JournalApplied Financial Economics
    Volume2
    Issue number4
    DOIs
    Publication statusPublished - 1 Dec 1992

    Scopus Subject Areas

    • Finance
    • Economics and Econometrics

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