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 journalArticlepeer-review

20 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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