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Price discovery in index futures and spot market in China: Based on HS300 stock index futures

Jinyu Zhu, Diao Jie-wen

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Abstract

This paper adopts the cointegration test, Granger causality analysis, VECM and impulse response analysis to investigate the causal relationship between HS300 index futures market and spot market based on the data of the markets. The result shows that there is a one-way causal relationship between the two markets, the price discovery primarily originates from futures markets and the futures market adjusts to the equilibrium faster than spot market.

About this research paper

What this paper is about

This paper adopts the cointegration test, Granger causality analysis, VECM and impulse response analysis to investigate the causal relationship between HS300 index futures market and spot market based on the data of the markets. The result shows that there is a one-way causal relationship between the two markets, the price discovery primarily originates from futures markets and the futures market adjusts to the equilibrium faster than spot market.

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Available abstract

This paper adopts the cointegration test, Granger causality analysis, VECM and impulse response analysis to investigate the causal relationship between HS300 index futures market and spot market based on the data of the markets. The result shows that there is a one-way causal relationship between the two markets, the price discovery primarily originates from futures markets and the futures market adjusts to the equilibrium faster than spot market.

Key concepts: Futures contract, Price discovery, Cointegration, Granger causality, Financial economics, Economics, Forward market, Econometrics

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Price discovery in index futures and spot market in China: Based on HS300 stock index futures — Research Paper | ScholarLens