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

doi:10.1080/758527099

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 journal › Journal article › peer-review

23 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 language	English
Pages (from-to)	187-190
Number of pages	4
Journal	Applied Financial Economics
Volume	2
Issue number	4
DOIs	https://doi.org/10.1080/758527099
Publication status	Published - 1 Dec 1992

Scopus Subject Areas

Finance
Economics and Econometrics

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10.1080/758527099

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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.",

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AB - 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.

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

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