Lead-Lag Relationship between Returns and Implied Moments: Evidence from KOSPI 200 Intra-Day Options Data

25 Pages Posted: 25 Sep 2015 Last revised: 11 Jan 2016

See all articles by Sol Kim

Sol Kim

Hankuk University of Foreign Studies

Geul Lee

Coinplug, Inc.

Date Written: January 11, 2016

Abstract

This study investigates whether a lead-lag relationship exists between the returns and the moments of the implied risk-neutral density (RND) in Korea Composite Stock Price Index (KOSPI) 200 spot, futures, and options markets. The empirical analysis suggests that although there is a bi-directional lead-lag relationship between the returns and the implied moments, the skewness and kurtosis of the implied RND Granger-cause the spot and futures returns more strongly than the returns do. In contrast, the implied volatility is shown to Granger-cause the returns less strongly than the returns do. In addition, this study shows that the lead-lag relationship strengthens when the spot market is exceptionally bullish or bearish.

Keywords: Lead-lag relationship, implied risk-neutral density, skewness, kurtosis

JEL Classification: G14, G17

Suggested Citation

Kim, Sol and Lee, Geul, Lead-Lag Relationship between Returns and Implied Moments: Evidence from KOSPI 200 Intra-Day Options Data (January 11, 2016). Available at SSRN: https://ssrn.com/abstract=2664528 or http://dx.doi.org/10.2139/ssrn.2664528

Sol Kim

Hankuk University of Foreign Studies ( email )

270 Imun-dong Dongdaemun-gu
Seoul, 130-791
Korea, Republic of (South Korea)

Geul Lee (Contact Author)

Coinplug, Inc. ( email )

11F, Office H, 20, Pangyoyeok-ro 146beon-gil,
Bundang-gu
Seongnam-si, Gyeonggi-do
Korea, Republic of (South Korea)

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