Price Lead-Lags in Indian Stock and Futures Market - A Wavelet Based Study

XI Capital Markets Conference, 21-22 December 2012, Indian Institute of Capital Markets (UTIICM)

15 Pages Posted: 24 Apr 2013 Last revised: 30 Apr 2013

See all articles by Irfan Ul Haq

Irfan Ul Haq

Pondicherry University - Department of Banking Technology

K. Rao

Pondicherry University

B. Viritha

Pondicherry University - Department of Commerce

Date Written: December 21, 2012

Abstract

This paper examines the relationship between the stock and futures markets in terms of cointegration (Johnson Cointegration) and lead lag relationship (Wavelet Approach). We applied the Maximum Overlap Discrete Wavelet Transform (MODWT) method to stock and futures prices of 12 near month contracts during the period April 2011 and March 2012. The study included 13 Scripts across sectors which are included both in BSE Sensex and Nifty 50. Empirical results show that stock and futures are cointegrated in the long run and there is either feedback relationship or futures lead across time scales and also we have seen in some scripts there is no lead lag neither contemporaneously nor in different time scales.

Keywords: Lead Lag, Cointegration, Error Correction, Wavelets

Suggested Citation

Haq, Irfan Ul and Rao, K. and Viritha, B., Price Lead-Lags in Indian Stock and Futures Market - A Wavelet Based Study (December 21, 2012). XI Capital Markets Conference, 21-22 December 2012, Indian Institute of Capital Markets (UTIICM) . Available at SSRN: https://ssrn.com/abstract=2255306 or http://dx.doi.org/10.2139/ssrn.2255306

Irfan Ul Haq (Contact Author)

Pondicherry University - Department of Banking Technology ( email )

Mahe Centre, Cemetery Road
Pondicherry, 605 014
India

K. Rao

Pondicherry University ( email )

Mahe Centre, Cemetery Road
Pondicherry University
Pondicherry, IN Puducherry UT 605 014
India

B. Viritha

Pondicherry University - Department of Commerce

Department of Commerce, Pondicherry University, Pu
Pondicherry, Pondicherry 605014
India

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