Study on the Lead and Lag Relationship Between the Kuala Lumpur Stock Exchange Composite Index Futures Contract and its Underlying Kuala Lumpur Stock Exchange Composite Index

The birth of the Kuala Lumpur Stock Exchange Composite Index futures contract (FKLI) in December 1 995 creates a lot of opportunities for research in the area of financial derivatives. This paper looks into the lead and lag relationship between the FKLI returns and the Kuala Lumpur Stock Exchange...

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Main Author:	Abdullah, Mahdhir
Format:	Thesis
Language:	English English
Published:	2001
Subjects:	Stock exchanges - Malaysia.
Online Access:	http://psasir.upm.edu.my/id/eprint/7942/1/GSM_2001_12_.pdf
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id	my-upm-ir.7942
record_format	uketd_dc
spelling	my-upm-ir.79422023-11-22T03:17:44Z Study on the Lead and Lag Relationship Between the Kuala Lumpur Stock Exchange Composite Index Futures Contract and its Underlying Kuala Lumpur Stock Exchange Composite Index 2001 Abdullah, Mahdhir The birth of the Kuala Lumpur Stock Exchange Composite Index futures contract (FKLI) in December 1 995 creates a lot of opportunities for research in the area of financial derivatives. This paper looks into the lead and lag relationship between the FKLI returns and the Kuala Lumpur Stock Exchange Composite Index (KLSE CI) returns since the inception of the stock index futures trading in December 1 995 until December 2000. The five-year period is segmented into three subperiods to see the lead-lag behaviour under different market volatility levels. The three subperiods are: Subperiod 1 ) from inception to June 1 997, Subperiod 2) from July 1 997 to September 1 998, and Subperiod 3) from October 1 998 to December 2000. The first subperiod reflects the period of stable prices and thin futures trading volume, the second subperiod represents the period of highly volatile market and huge futures trading volume, and the third subperiod reflects the period of reasonably stable prices and fairly high trading volume. In this study, a multiple regression model is used as the methodology to test for the lead and lag relationship between the stock index futures returns and KLSE CI returns. The study finds that there is a strong contemporaneous relationship and there exists a lead effect from the futures market to the spot market by one day in subperiods 1 and 3 . Subperiod 2 shows a mix lead-lag relationship between the two markets. For the whole period under review, the relationship has been found to be ambiguous and inconclusive. Stock exchanges - Malaysia. 2001 Thesis http://psasir.upm.edu.my/id/eprint/7942/ http://psasir.upm.edu.my/id/eprint/7942/1/GSM_2001_12_.pdf text en public masters Universiti Putra Malaysia Stock exchanges - Malaysia. Graduate School of Management Mohd Nasir, Annuar English
institution	Universiti Putra Malaysia
collection	PSAS Institutional Repository
language	English English
advisor	Mohd Nasir, Annuar
topic	Stock exchanges - Malaysia.
spellingShingle	Stock exchanges - Malaysia. Abdullah, Mahdhir Study on the Lead and Lag Relationship Between the Kuala Lumpur Stock Exchange Composite Index Futures Contract and its Underlying Kuala Lumpur Stock Exchange Composite Index
description	The birth of the Kuala Lumpur Stock Exchange Composite Index futures contract (FKLI) in December 1 995 creates a lot of opportunities for research in the area of financial derivatives. This paper looks into the lead and lag relationship between the FKLI returns and the Kuala Lumpur Stock Exchange Composite Index (KLSE CI) returns since the inception of the stock index futures trading in December 1 995 until December 2000. The five-year period is segmented into three subperiods to see the lead-lag behaviour under different market volatility levels. The three subperiods are: Subperiod 1 ) from inception to June 1 997, Subperiod 2) from July 1 997 to September 1 998, and Subperiod 3) from October 1 998 to December 2000. The first subperiod reflects the period of stable prices and thin futures trading volume, the second subperiod represents the period of highly volatile market and huge futures trading volume, and the third subperiod reflects the period of reasonably stable prices and fairly high trading volume. In this study, a multiple regression model is used as the methodology to test for the lead and lag relationship between the stock index futures returns and KLSE CI returns. The study finds that there is a strong contemporaneous relationship and there exists a lead effect from the futures market to the spot market by one day in subperiods 1 and 3 . Subperiod 2 shows a mix lead-lag relationship between the two markets. For the whole period under review, the relationship has been found to be ambiguous and inconclusive.
format	Thesis
qualification_level	Master's degree
author	Abdullah, Mahdhir
author_facet	Abdullah, Mahdhir
author_sort	Abdullah, Mahdhir
title	Study on the Lead and Lag Relationship Between the Kuala Lumpur Stock Exchange Composite Index Futures Contract and its Underlying Kuala Lumpur Stock Exchange Composite Index
title_short	Study on the Lead and Lag Relationship Between the Kuala Lumpur Stock Exchange Composite Index Futures Contract and its Underlying Kuala Lumpur Stock Exchange Composite Index
title_full	Study on the Lead and Lag Relationship Between the Kuala Lumpur Stock Exchange Composite Index Futures Contract and its Underlying Kuala Lumpur Stock Exchange Composite Index
title_fullStr	Study on the Lead and Lag Relationship Between the Kuala Lumpur Stock Exchange Composite Index Futures Contract and its Underlying Kuala Lumpur Stock Exchange Composite Index
title_full_unstemmed	Study on the Lead and Lag Relationship Between the Kuala Lumpur Stock Exchange Composite Index Futures Contract and its Underlying Kuala Lumpur Stock Exchange Composite Index
title_sort	study on the lead and lag relationship between the kuala lumpur stock exchange composite index futures contract and its underlying kuala lumpur stock exchange composite index
granting_institution	Universiti Putra Malaysia
granting_department	Graduate School of Management
publishDate	2001
url	http://psasir.upm.edu.my/id/eprint/7942/1/GSM_2001_12_.pdf
_version_	1794018699597840384

Study on the Lead and Lag Relationship Between the Kuala Lumpur Stock Exchange Composite Index Futures Contract and its Underlying Kuala Lumpur Stock Exchange Composite Index

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