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Lead - Lag Relationship in Indian Stock Market

Author : Bhaskkar Sinha

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Page : 21 pages

File Size : 36,18 MB

Release : 2019

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This paper studies the lead lag relationship between the spot and future market in the context of introduction of Nifty futures at the National Stock Exchange (NSE) in June 2000. Co-integration and linear regression techniques are used to determine the existence of any such relation in the two markets during 1st April 2002 and 31st March 2005. The major findings from this endeavor are that the Nifty Futures market leads the nifty index cash market, a lead - lag relation can be traced for all the years under study individually, the relationship among the Nifty index futures and cash market has differed considerably during the mentioned time period. On the basis of this analysis we can say that the two markets are now becoming more efficient and we see a much faster flow of information between the two markets. Further the study tries to portray a picture for the individual stock in the Samp;amp;P CNX Nifty. This paper indicates that the two markets are highly efficient and in some cases any shock in the market is simultaneously absorbed in both the markets, suggesting an absence of any lead - lag relationship in both the markets under consideration.



An Analysis of Lead-Lag Relationship Between Stock Returns Using Spectral Methods

Author : Avishek Bhandari

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Page : 13 pages

File Size : 10,36 MB

Release : 2020

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This paper examines the relationship between BSE Sensex and three other developed markets in the frequency domain. Cross-spectral methods, which are important in discovering and interpreting the relationships between economic variables, are used to analyze the relationships between different price series. Cross-spectral methods, developed using Fourier techniques, give valuable information regarding the correlation structure in the frequency domain. This paper applies these methods to study the lead-lag relationship between BSE Sensex and other international markets. The results show no significant co-movement of Indian stock prices with developed market prices at lower frequencies; and in the long run, the developed stock markets seem to lead Indian market. However, in the short run, some evidence of behavioral similarities is observed.



Market Capitalization, Cross Correlations, the Lead/Lag Structure and Microstructure Effects in the Indian Stock Market

Author : Sunil S. Poshakwale

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Page : 24 pages

File Size : 14,19 MB

Release : 2002

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The lead/lag relationship between large and small cap firms is investigated by using a number of Indian equity index series that differ in their market capitalisation characteristics. Large cap indices are found to lead small cap indices and to have higher speeds of adjustment towards intrinsic values. Pure thin trading effects and a thin trading/adjustment interaction effect are found to make significant contributions to the lead/lag effect. The intrinsic value processes themselves, are found to be characterised by a small degree of overreaction.



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

Author : Irfan Ul Haq

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Page : 15 pages

File Size : 50,78 MB

Release : 2013

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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.



Relationship Between Spot and Futures Prices

Author : Rajni Kant Rajhans

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Page : 8 pages

File Size : 25,91 MB

Release : 2015

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Book Description

In developed financial markets, there is no dearth of literature on relationship between spot and future market. India, in the year 2000 introduced derivative market to provide risk mitigation mechanism to market participants. The present study concluded that there is no short-run relationship between Nifty 50 Index and Nifty 50 Futures Index while there is a long-run relationship between the two. The combined analysis of outputs of Granger Causality and Johansen co-integration provided a more rational justification and can be interpreted that possibly at a time of high volatile market when price discovery is not more on rational basis but rather on other spill-over, a short-run lead-lag relationship could not be observed between spot stock index and futures index. However, in long-run the volatility dies away and market returns back to fundamental factors and hence, there is evidence of long-run relationship between spot stock index and futures index.



Momentum Trading on the Indian Stock Market

Author : Gagari Chakrabarti

Publisher : Springer Science & Business Media

Page : 123 pages

File Size : 32,53 MB

Release : 2013-03-27

Category : Business & Economics

ISBN : 8132211278

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Book Description

This study is an exploration of the Indian stock market, focusing on the possible presence of momentum trading. One thing, however, should be noted. While it is true that momentum trading, which tends to generate speculative bubbles, may result in a financial market crash, its nature in contrast might depend on the nature of the economy itself. The study, while exploring the presence and nature of momentum trading on the Indian stock market in recent years, seeks to relate it to significant structural breaks in the Indian or global economy. To be precise, it outlines a potential correlation between the instability in the stock market and the speculative trading on the market, exploring the question of whether it is human psychology that drives financial markets. In the process, the choice of a significant structural break has been obvious: the global financial meltdown of 2007-2008 – a crisis that has often been referred to as the worst ever since the crash of 1929. While analyzing the nature of momentum trading on the Indian stock market with regard to the financial crisis of 2007-08, the study takes into account two major representatives of the market, the BSE (Bombay Stock Index) and NSE (National Stock Index), for the period 2005 to 2012. This study seeks to answer a few important questions. First of all, it tries to unveil the underlying structure of the market. In doing so, it examines the following issues: (i) What was the latent structure of the Indian stock market leading up to the crisis of 2007-08? Does the structure offer insights into designing profitable trading strategies? (ii) Is it possible to construct a profitable portfolio on the Indian stock market? (iii) Is there any profitable trading strategy on the Indian stock market? While exploring these issues, the study delves deeper, breaking the whole period down into two sub-periods, before the crisis of 2008 and after the crisis. The purpose of this division is to determine whether there has been any discernible change in the market structure since the shock.



Interaction between Equity and Derivatives Markets in India

Author : Y. V. Reddy

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Page : pages

File Size : 34,42 MB

Release : 2015

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Book Description

The temporal relationship between the equities market and the derivatives market segments of the stock market has been studied using various methods and by identifying lead-lag relationship between the value of a representative index of the equities market and the price of a corresponding index futures contract in the derivatives market. It has been generally observed that price innovations appear first in the derivatives market and are then transmitted to the equities market. In this paper, the dynamics of such information transport between stock market and derivatives market are studied using the information theoretic concept of entropy, which captures non-linear dynamic relationship also.



Intraday Lead-Lag Relationship Between Stock Index and Stock Index Futures Markets

Author : Ersan Ersoy

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Page : 18 pages

File Size : 29,43 MB

Release : 2016

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Book Description

In perfectly frictionless and rational markets, spot markets and futures markets should simultaneously reflect new information. However, due to market imperfections, one of these markets may reflect information faster than the other and therefore may lead to the other. This study examines the lead-lag relationship between stock index and stock index futures, in terms of both price and volatility, by using 5 minute data over 2007-2010 period. The findings of this study indicate that a stable long-term relationship between Turkish stock index and stock index futures exists, however stock index futures do not lead stock index and there is a two way interaction between them. Therefore either of the markets is dominant over the other one in the price formation process.



Anatomy of Global Stock Market Crashes

Author : Gagari Chakrabarti

Publisher : Springer Science & Business Media

Page : 69 pages

File Size : 27,21 MB

Release : 2012-01-05

Category : Business & Economics

ISBN : 8132204638

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Book Description

This work is an exploration of the global market dynamics, their intrinsic natures, common trends and dynamic interlinkages during the stock market crises over the last twelve years. The study isolates different phases of crisis and differentiates between any crisis that remains confined to the region and those that take up a global dimension. The latent structure of the global stock market, the inter-regional and intra-regional stock market dynamics around the crises are analyzed to get a complete picture of the structure of the global stock market. The study further probing into the inherent nature of the global stock market in generating crisis finds the global market to be chaotic thus making the system intrinsically unstable or at best to follow knife-edge stability. The findings have significant bearing at theoretical level and on policy decisions.