Price discovery and information transmission across stock index futures: evidence from VN 30 Index Futures on Vietnam’s stock market
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Author(s)Nguyễn Thị NhungLink to ORCID Index: https://orcid.org/0000-0002-3648-1964
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Trần Thị Vân Anh
,
Nguyễn Tố Nga
,
Vương Thùy Linh
,
Đinh Xuân Cường
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DOIhttp://dx.doi.org/10.21511/imfi.16(4).2019.23
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Article InfoVolume 16 2019, Issue #4, pp. 262-276
- Cited by
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Funding dataFunder name: Vietnam National University (VNU), VietnamFunder identifier: –Award numbers: 86.16.54
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398 Downloads
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Creative Commons Attribution 4.0 International License
The introduction of the first tradable stock index futures of VN 30 is a very good signal showing that Vietnam is starting to have a high-level financial market, which brings many expectations about sustainable and safe development of its stock market. However, risk concerns of this type of derivative products have been raising with many claims since then. This article aims to provide empirical evidences to show if futures trading plays important role of price discovery and information transmission for spot market. Using daily data collected about VN 30 Index Futures, VN 30 Index, VN Index from August 10, 2017 to February 28, 2019, which is divided into three sub-periods (increase/decrease/recovery), the research verifies VN 30 Index Futures’ role of price discovery and information transmission by applying Vector Error Correction Model (VECM). Empirical findings show that there is a stable equilibrium relationship between the two series groups (including VN 30 Index Futures, VN 30 Index and VN 30 Index Futures and VN Index) during three sub-periods or spot and futures markets are integrated and synchronized. In particular, VN 30 Index Futures’ price discovery and information transmission are clearly seen when the market falls or does not change a lot.
- Keywords
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JEL Classification (Paper profile tab)G10, G40
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References36
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Tables5
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Figures3
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- Figure 1. Research design
- Figure 2. Price movements of VN Index, VN 30 Index, and VN 30 Index Futures
- Figure 3. The coefficient of ETC
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- Table 1. Impact of stock index futures’ introduction
- Table 2. Statistics of VN Index, VN 30 Index, and VN 30 Index Futures return series
- Table 3. Trace and Max-Eigenvalue test for VN 30 Index Futures and VN 30 Index
- Table 4. Trace and Max-Eigenvalue test for VN 30 Index Futures and VN Index
- Table 5. Estimated VECM and cointegrating equation (long-run model)
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Dynamics in futures and spot markets: A panel study of advanced and emerging economies of Asia
Sangeeta Wats ,
Chandrima Sikdar
doi: http://dx.doi.org/10.21511/imfi.19(1).2022.05
Investment Management and Financial Innovations Volume 19, 2022 Issue #1 pp. 64-76 Views: 725 Downloads: 289 TO CITE АНОТАЦІЯThe study explores the underpinning interlinkages in the spot and futures markets across nine Asian advanced and emerging economies, and examines whether development status has any impact on the nature and speed of adjustments in the information transmission. By applying Panel VECM to the data set from the very day futures trading was initiated on the respective exchange till February 2020, the results highlight that in the long run, over the entire period, the futures market adjusts 69.7% more than the spot market and there is a bidirectional causality in the short run. Even in the sub-periods, the same phenomena were observed, and in the short run, there was a unidirectional causality from futures to spot during the crisis period. An identical trend was observed for country groups in three sub-periods. However, in the short run, during the crisis period, a unidirectional causality from futures to spot was found in advanced economies, while the opposite pattern was found in emerging economies. The paper establishes that the spot market dominates the information dissemination process. The results also demonstrate that traders prefer liquidity over leverage as their trading venue, the existence of potential index arbitrage opportunities, and validate that development status has no impact on the information transmission pattern amongst the markets, except during turbulent times. The study offers insights to market participants to develop their specific trading strategies in these markets at various economic stages, thereby increasing their expected returns.
