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
Date Written: December 21, 2012
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
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