Chapter 13 Temporal causality of returns of index futures and stock markets: Evidence from Malaysia

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International Finance Review

ISSN: 1569-3767
Series editor(s): Professor J. Jay Choi

Subject Area: Accounting and Finance

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Document Information:
Title:	Chapter 13 Temporal causality of returns of index futures and stock markets: Evidence from Malaysia
Author(s):	Wee Ching Pok
Volume:	8 Editor(s): Suk-Joong Kim, Michael D. Mckenzie ISBN: 978-0-7623-1471-3 eISBN: 978-1-84950-514-7
Citation:	Wee Ching Pok (2007), Chapter 13 Temporal causality of returns of index futures and stock markets: Evidence from Malaysia, in Suk-Joong Kim, Michael D. Mckenzie (ed.) Asia-Pacific Financial Markets: Integration, Innovation and Challenges (International Finance Review, Volume 8), Emerald Group Publishing Limited, pp.263-288
DOI:	10.1016/S1569-3767(07)00013-1 (Permanent URL)
Publisher:	Emerald Group Publishing Limited
Article type:	Chapter Item
Abstract:	This chapter investigates the impact change of the composition of market agents on the timing of the arrival of information in Bursa Malaysia. The price discovery role of futures trading on the spot market is examined through three distinct sub-periods: pre-crisis, crisis and after capital controls. For this purpose, the Johansen Cointegration (1988, 1991) and VECM and Granger causality are used. The analysis shows that there is no significant long-run relationship. As for short-run, the results show futures lead spot. However, futures’ lead is shorter in pre-crisis and crisis periods where foreign institutional investors dominate. This study deduces that the significant change in the composition of market agents could contribute to the variation of lead–lag relationship.