Jusoh, Hashim and Bacha, Obiyathulla and Masih, Abul Mansur M. (2014): Multiscale LeadLag Relationship between the Stock and Futures Markets: Malaysia as a Case Study.

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Abstract
There is a considerable literature relating to a leadlag relationship between the stock index (spot) and stock index futures markets in developed countries compared to emerging countries. The analysis of this relationship in an emerging market based on a different investment horizon is significant for both academic and trading purposes. In this study, we analyze the leadlag relationship between stock index and stock index futures in Malaysia. We use a new approach based on the Continuous Wavelet Transform (CWT) and the Discrete Wavelet Transform (DWT). The results show variability of the leadlag relationship across frequency ranges and time scales, and also occasional inphase behaviour between both markets. The relationships between stock index and stock index futures are shown to evolve over time with nonhomogeneous trends across different time scales. Some strong correlations have been found in leadlag interactions between the markets. The result from this study would provide a better picture of a current derivatives market in emerging countries, specifically in Malaysia. Hopefully it will shed some light in furthering the development of Islamic equity futures within the Islamic capital market, therefore will encourage Islamic asset managers to use derivatives as a hedging tool to protect their funds’ value.
Item Type:  MPRA Paper 

Original Title:  Multiscale LeadLag Relationship between the Stock and Futures Markets: Malaysia as a Case Study 
English Title:  Multiscale LeadLag Relationship between the Stock and Futures Markets: Malaysia as a Case Study 
Language:  English 
Keywords:  Stock Index, Stock Index Futures, LeadLag Relationship, Continuous Wavelet Transform, Discrete Wavelet Transform 
Subjects:  C  Mathematical and Quantitative Methods > C5  Econometric Modeling G  Financial Economics > G3  Corporate Finance and Governance 
Item ID:  56954 
Depositing User:  Dr Mansur Masih 
Date Deposited:  29. Jun 2014 05:41 
Last Modified:  29. Jun 2014 05:53 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/56954 