An Investigation of the Lead-Lag Relationship in Returns and Volatility between Cash and Stack Index Futures: The Case of Greece

28 Pages Posted: 20 Jun 2002

See all articles by Ilias Visvikis

Ilias Visvikis

Independent

Panayotis Alexakis

Athens Stock Exchange

Manolis G. Kavussanos

Athens University of Economics and Business - Department of Accounting and Finance

Abstract

This paper investigates the lead-lag relationship in daily returns and volatilities between price movements of stock index futures and the underlying cash index in the FTSE/ASE-20 and FTSE/ASE Mid-40 markets of the Athens Stock Exchange. Empirical results confirm previous findings that there is a large contemporaneous relation, together with asymmetric lead-lag behaviour between the cash and futures markets. There is evidence that the futures lead the cash index returns, by responding more rapidly to economic events than stock prices. This asymmetric lead-lag relation can be attributed to the predictive power of futures returns, supporting the price discovery hypothesis that new market information is disseminated faster in the futures market compared to the stock market. After examining whether daily volatility in futures prices has systematically lead daily volatility in the cash index, the results provide a weak indication that cash volatility spills some information in the futures market volatility in the FTSE/ASE-20 market. In the FTSE/ASE Mid-40 market, the results indicate that there are robust volatility spillovers from the futures to the cash market, which imply that the futures market can be used as a price discovery vehicle.

Keywords: Stock Index Futures, Price Discovery, GARCH, Volatility Spillovers

JEL Classification: G13, G14

Suggested Citation

Visvikis, Ilias and Alexakis, Panayotis and Kavussanos, Manolis G., An Investigation of the Lead-Lag Relationship in Returns and Volatility between Cash and Stack Index Futures: The Case of Greece. EFMA 2002 London Meetings. Available at SSRN: https://ssrn.com/abstract=314887 or http://dx.doi.org/10.2139/ssrn.314887

Ilias Visvikis (Contact Author)

Independent ( email )

No Address Available
United States

Panayotis Alexakis

Athens Stock Exchange ( email )

10 Sophocleous str.
Athens 105 59
Greece

Manolis G. Kavussanos

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission St
TK 104 34 Athens
Greece
0030 210 8203167 (Phone)
0030 210 8228816 (Fax)

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