Price Discovery in Taiwan Stock Indices and Their Futures Contracts

• Main Authors: Li, Chia-Chou, 李家州
• Other Authors: Hsieh Wen-Liang
• Format: Others
• Language: zh-TW
• Online Access: http://ndltd.ncl.edu.tw/handle/91690657522754770980

碩士 === 淡江大學 === 財務金融學系 === 86 === This paper investigates the interrelationship between cash and futures markets for SIMEX MSCI Taiwan index and CME DJGI Taiwan index. Johansen Maximum Likelihood Method is adopted to test long-term equilibrium relation between variables. We identify the price discovery role of Taiwan index futures markets by examining the lead-lag relationships between cash and futures prices used Granger''s (1969) notion of causality. In addition, we also examine dynamic price leadership for MSCI Taiwan index futures market. The data used in this study are daily cash and futures for MSCI Taiwan index, for the period between January 9, 1997 and March 31, 1998. The data of DJGI Taiwan index covers the period from January 11,1997, through May 31, 1997. The empirical results of this study are as follow: 1. The cash and futures markets are not cointegrated until deregulation. 2. MSCI Taiwan index futures lead cash, so MSCI Taiwan index futures play a price discovery role. DJGI Taiwan index spot lead futures; hence DJGI Taiwan index futures does not have price discovery function. 3. The cash and futures prices appear to be mostly simultaneously related on a daily basis and that lagged interactions although statistically significant, are rather weak in a magnitude. This Indicates that spot and futures prices move largely in unison. 4. Bidirectional causality occurs between cash and futures markets. 5. Subperiod analysis reveals that the lead-lag relation varies greatly depending on the period of analysis. 6. Whether we use closing prices or open prices makes no difference. They provide the same conclusions.