Dynamics in futures and spot markets: A panel study of advanced and emerging economies of Asia
The 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 f...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2022-02-01
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| Series: | Investment Management & Financial Innovations |
| Subjects: | |
| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/16105/IMFI_2022_01_Wats.pdf |
| _version_ | 1818894200904613888 |
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| author | Sangeeta Wats Chandrima Sikdar |
| author_facet | Sangeeta Wats Chandrima Sikdar |
| author_sort | Sangeeta Wats |
| collection | DOAJ |
| description | The 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. |
| first_indexed | 2024-12-19T18:24:43Z |
| format | Article |
| id | doaj.art-d5a123e244214cbbb354ba72335e19c2 |
| institution | Directory Open Access Journal |
| issn | 1810-4967 1812-9358 |
| language | English |
| last_indexed | 2024-12-19T18:24:43Z |
| publishDate | 2022-02-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Investment Management & Financial Innovations |
| spelling | doaj.art-d5a123e244214cbbb354ba72335e19c22022-12-21T20:10:52ZengLLC "CPC "Business Perspectives"Investment Management & Financial Innovations1810-49671812-93582022-02-01191647610.21511/imfi.19(1).2022.0516105Dynamics in futures and spot markets: A panel study of advanced and emerging economies of AsiaSangeeta Wats0https://orcid.org/0000-0002-0883-4785Chandrima Sikdar1https://orcid.org/0000-0002-9853-3600Ph.D., Associate Professor, School of Business Management, Narsee Monjee Institute of Management Studies University (NMIMS University)Ph.D., Professor, School of Business Management, Narsee Monjee Institute of Management Studies University (NMIMS UniversityThe 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.https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/16105/IMFI_2022_01_Wats.pdfarbitragecrisisinformation transmissioninvestment decisionspanel VECMtrading venue |
| spellingShingle | Sangeeta Wats Chandrima Sikdar Dynamics in futures and spot markets: A panel study of advanced and emerging economies of Asia Investment Management & Financial Innovations arbitrage crisis information transmission investment decisions panel VECM trading venue |
| title | Dynamics in futures and spot markets: A panel study of advanced and emerging economies of Asia |
| title_full | Dynamics in futures and spot markets: A panel study of advanced and emerging economies of Asia |
| title_fullStr | Dynamics in futures and spot markets: A panel study of advanced and emerging economies of Asia |
| title_full_unstemmed | Dynamics in futures and spot markets: A panel study of advanced and emerging economies of Asia |
| title_short | Dynamics in futures and spot markets: A panel study of advanced and emerging economies of Asia |
| title_sort | dynamics in futures and spot markets a panel study of advanced and emerging economies of asia |
| topic | arbitrage crisis information transmission investment decisions panel VECM trading venue |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/16105/IMFI_2022_01_Wats.pdf |
| work_keys_str_mv | AT sangeetawats dynamicsinfuturesandspotmarketsapanelstudyofadvancedandemergingeconomiesofasia AT chandrimasikdar dynamicsinfuturesandspotmarketsapanelstudyofadvancedandemergingeconomiesofasia |