Year of Award

2016

Degree Type

Thesis

Degree Name

Doctor of Philosophy (PhD)

Department

Department of Finance and Decision Sciences.

Principal Supervisor

Fung, Joseph K. W.

Keywords

Stock index futures, Stock exchanges

Language

English

Abstract

In a perfect market with no limit on arbitrage, the price movements or returns of an index futures contract must be perfectly and positively correlated with those of the underlying cash index and the component stocks of the index. However, transaction costs, capital limits and regulatory restrictions reduce arbitrage efficiency which is being revealed by a wealth of findings that index futures and the underlying cash assets do not move in perfect unison. It is an important issue to practitioners, exchange and regulatory authorities, and academics to understand which and how different market and idiosyncratic factors drive the dynamic temporal relationships between an index futures contract and the related individual cash assets. Chapter 1 of the thesis examines how and to what extent the sampling frequency for return calculation affects the intraday correlation and lead-lag relationship between index futures, the underlying cash index and individual cash assets. Chapter 2 tests how and to what extent index weight, liquidity, idiosyncratic information of a single cash stock, market conditions and regulatory restrictions affect the intraday correlation between the futures and individual cash asset. Following the line of argument in Chapter 2, Chapter 3 analyzes the impact of stock-specific and market factors on the intraday lead-lag relationship between the futures and single cash assets. The study deduces that stock-specific and market factors significantly affect the intraday dynamic relationship between index futures and individual cash assets and it is a phenomenon that could be explained by the optimal strategies adopted by index arbitrageurs.

Comments

Principal supervisor: Prof. Fung Kwun Wing Joseph. ; Thesis submitted to the Department of Finance and Decision Sciences. ; Thesis (Ph.D.)--Hong Kong Baptist University, 2015.

Bibliography

Includes bibliographical references (pages 104-112)

Copyright

The author retains all rights to this work. The author has signed an agreement granting HKBU a non-exclusive license to archive and distribute their thesis.



Share

COinS
 
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.