Relationship Between Spot And Futures Markets Finance Essay

The intent of this survey is to look into the lead-lag relationship between topographic point and hereafters markets in Malaysia during the Asiatic Financial Crisis. We apply the day-to-day topographic point and hereafters monetary values from 15 December 1995 to 21 August 2009. We examine the non-linear causality trial based on Cross Correlation Function ( CCF ) attack. Our consequences indicate that the Malayan stock market is slow in absorbing new information to foretell future returns motion. This implies that the new information transmittal in Malayan stock market is slow. Based on augmented analysis, our consequences indicate that integrating spillover consequence in look intoing lead slowdown relationship between topographic point and hereafters markets is really of import. Based on causality in discrepancy, we found that hereafters lead topographic point returns during crisis period but topographic point lead hereafters returns during post-crisis. This farther indicates that both returns take a longer clip to convey information due to dynamic consequence responding easy between topographic point and hereafters markets. Based on our findings, we suggest deductions in two positions. First position is that the investors should trust on the historical monetary values motion to foretell future stock public presentation in order to fudge against the hazard. Second position is to give deductions to the academicians who are able to cognize the velocity of transmittal of information flow to place the market efficiency.

Chapter 1: Introduction

Overview

In this chapter, we study the topographic point and hereafters markets in Kuala Lumpur Options and Financial Futures Exchange ( KLOFFE ) . We explain the background of survey in the first subdivision, followed by the following subdivision which is the job statement of our survey on how the asymmetric information would impact the investors. The subsequent subdivision explains the research objectives during the three sub-periods of Asiatic fiscal crisis. It is followed by subdivision four which surveies on how the part will profit the investors and academicians. Section five is the chapter layout that explains the overview of the five chapters in this survey. The last subdivision is the sum-up of this chapter.

1.1 Background of survey

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In July 1980, Malayan capital market merchandises were expanded by set uping the Kuala Lumpur Commodity Exchange ( KLCE ) . The KLCE was the first hereafters exchange in Southeast Asia. Merchandises of capital market merchandises in Malaysia have been expanded further when Malaysia has launched Kuala Lumpur Options and Financial Futures Exchange ( KLOFFE ) on 15 December 1995, such as establishing the Stock Index Futures ( SIF ) contract. The contract was popular and has impressive growing in trading volume but has well declined in trading volume when the authorities implemented the capital controls in September 1998. The Malaysian Monetary Exchange ( MME ) was set up in 1996 to supply fixed income derived functions, which is a three-month KLIBOR ( Kuala Lumpur Interbank Offer Rate ) hereafters contract. KLCE subsequently merged with the MME in December 1998 and became the Commodity and Monetary Exchange of Malaysia ( COMMEX ) . In June 2001, KLOFFE and COMMEX merged to go Malaysia Derivatives Exchange Berhad ( MDEX ) . Nowadays, the MDEX becomes portion of Kuala Lumpur Stock Exchange ( KLSE ) . These consolidations of other exchanges under the KLSE will heighten the corporate efficiency of the assorted market establishments, better the economic systems of graduated table and range by sharing and incorporating the market substructure and common operational maps.

Introduction of the stock index hereafters in Malaysia has become a popular derivative merchandise for fudging because of several grounds which are the stock index hereafters offering low dealing costs and can be efficaciously used for fudging the underlying topographic point hazard. Due to the hereafters market going popular, it has drawn the attending of the investors to analyze which monetary value Acts of the Apostless as monetary value find in order to maximise net income and minimise losingss.

Since the outgrowth of the derived functions market in April 1982, there were many research workers interested in analyzing the relationship between topographic point and hereafters monetary values. For case, Silvapulle and Moosa ( 1999 ) , Floros and Vougas ( 2007 ) found that hereafters monetary value lead to the topographic point monetary value while some research workers such as Bekiros and Diks ( 2008 ) and Bu ( 2011 ) , found that topographic point monetary values lead to hereafters monetary values. Some research workers even found that there was a bi-directional relationship between topographic point and hereafters monetary value.

Market participants play the chief function as the determiners to find the overall stock market public presentation. As rational investors, they must cognize the current stock market public presentation, whether the stock market is efficient or inefficient. Therefore, information flow which exists among topographic point and hereafters market acts as an index on the stock monetary value motion.

The velocity of information flow determines the motion of topographic point and hereafters monetary values. Now, when the topographic point and hereafters monetary values receive coincident information flow, the motion of monetary values becomes contemporary. There is no causal consequence on the monetary values relationship. But this state of affairs will alter when the information flows faster in the topographic point or hereafters market. As a consequence, there appears to be a lead-lag relationship between both monetary values. The market receives information foremost and will act upon monetary value motion in other markets and the market will go inefficient.

Based on past surveies, the relationship between topographic point future monetary values may be influenced by any exogenic daze, particularly crisis period. Therefore, our survey intends to analyze the causal relationship between topographic point monetary values and hereafters monetary value during the Asiatic Financial Crisis since the Asian Financial Crisis has caused a greater consequence on the Malayan stock market compared to other crisis. The Asiatic Financial Crisis in 1997-1998 was caused by currency depreciation and stock market clang in all Asiatic states.

Before the Asiatic Financial Crisis, Malaysia and other Asiatic states achieved high growing rate in GDP and high addition in the stock market value. At the beginning of 1997, Malayan stock market index reached above 1200 points but it dived more than 50 % to under 600 points when the crisis happened in Malaysia. Furthermore, this crisis had affected the public presentation of topographic point and hereafters monetary values, particularly in Malayan stock market which had been devalued for more than 50 % . During the crisis, monetary values in both markets were extremely fluctuated. While in the post-crisis period, the volatility in monetary values became a moderate degree and reasonably traded.

1.2 Problem Statement

Asymmetrical information exists among market participants due to each of them accessing to different information about the following market monetary value motion. Due to asymmetric information, the investors have deficiency of information about market monetary value motion, so they might confront losingss if they have made any incorrect determinations in their investings. The intent of our survey is to look into which monetary value motion will respond faster between the topographic point and hereafters monetary values in KLOFFE in order to look into asymmetric information issues.

Since the Malayan stock market has a short history which was established in 1995, the stock market was affected by the Asiatic Financial Crisis in 1997. Due to the immatureness of the market, it gives the motivation for us to analyze how the constructions of the information flow alteration during pre and station crisis periods. There were few investors involved in hereafters market due to the immature hereafters market going an issue that will act upon the monetary value find of the hereafters monetary values.

1.3 Research Objective

General aim

Our aim for this survey is to find which monetary value Acts of the Apostless as monetary value find in foretelling stock monetary value motion during crisis.

Specific aim

In order to accomplish our general aim, we have made three specific aims. The first aim is to explicate the features of topographic point and hereafters markets during the 3 periods of fiscal crisis. The following aim is to analyze the way of causal consequence between topographic point and hereafters market during the three sub- periods of fiscal crisis, whether the causal directional is unidirectional, bidirectional or no consequence across different periods. The last aim is to analyze the impacts of Asiatic Financial Crisis on lead-lag relationship between topographic point and hereafters markets in Malaysia.

1.4 Significance of survey

There are two expected parts in our survey. In footings of portfolio stock investing, it can supply information about lead-lag relationship between topographic point and hereafters monetary values to investors during crisis. This will take to investors being able to find monetary value find in foretelling stock monetary value motion. For case, investors can utilize the cognition of causal relationship between topographic point and hereafters returns in the yesteryear to foretell topographic point and hereafters monetary value motions in the hereafter. This will supply proper counsel for investors to pull off or diversify their investing hazard efficaciously during crisis and non-crisis.

The following expected part is to suit or back up our findings with theory or hypothesis. This will lend to the new cognition in the field of finance. For illustration, our survey can supply academicians a better understanding about the features of topographic point and hereafters returns. This, in bend, will give information sing the relationship between information flow and volatility to explicate the causality between topographic point and hereafters returns.

1.5 Chapter Layout

In our survey, this first chapter is followed by 2nd chapter that reviews on topographic point and hereafters monetary values relationship. The motive of analyzing this chapter is to uncover what the old surveies have done in their research. The following chapter is to depict informations, variable and methodological analysis. The subsequent chapter is to describe, present and construe the consequences and findings. The last chapter is to sum up the findings from the old chapter and suggest the deductions of survey, restriction of surveies and recommendations to the hereafter research worker.

1.6 Decision

In a nutshell, the derivative market in Malaysia of topographic point and hereafters monetary values under KLOFFE started from 15 December 1995 and it was foremost established in Malaysia. The chief thing that we will look through is whether the relationship between topographic point and hereafters returns alterations during the Asiatic Financial Crisis. Hence, we proceed to the following chapter to analyze the causal relationship in the past surveies. Before we further our analysis on lead-lag relationship of topographic point and hereafters returns, we need to reexamine the literature on relationship of both returns in order to synthesise the past findings.

Chapter 2: LITERATURE REVIEW

2.0 Overview

In this chapter, we are analyzing the relationship between topographic point and hereafters markets in the old surveies. We will explicate the correlativity between topographic point and hereafters markets in the first subdivision ; followed by the following subdivision which is bi-directional relationship between topographic point and hereafters markets. The subsequent subdivision explains the uni-directional relationship between topographic point and hereafters markets in footings of topographic point lead hereafters. It is followed by subdivision four which surveies on the uni-directional relationship in footings of hereafters lead topographic point. The last subdivision is the sum-up of this chapter on the survey from the old subdivision.

2.1 Correlation between topographic point and hereafters market

Peroni and McNown ( 1998 ) studied three energy hereafters markets which were Heating Oil, West Texas Intermediate ( WTI ) and Unleaded Gasoline. The sample period covered from January 1984 to March 1996 for WTI, November 1979 to August 1995 for heating oil while January 1985 to March 1996 was for leadless gasolene. Two trials included non-informative and enlightening had been adopted to analyze the market efficiency of these several energy markets. In footings of non-informative trial, there was market inefficiency of hereafters market for heating oil, leadless gasolene and WTI petroleum oil due to bias appraisal. Besides, two enlightening trials yielded grounds which were sustained to the market efficiency. This implied that these three markets were co-integrated. Furthermore, two of the markets have weak grounds of consecutive correlativity. This indicated that the market was either inefficient or holding autocorrelation job of hazard premium.

Chuang ( 2003 ) investigated on how the information flow affected the public presentation of topographic point and hereafters monetary values. They studied on Taiwan stock Exchange capitalisation weighted index ( TAISEX ) and Morgan Stanley capital International ( MSCI ) of the day-to-day informations from July 21, 1998 to September 20, 1999. They employed multivariate mistake rectification EGARCH ( EC-EGARCH ) theoretical account to analyze on volatility and long tally relationship. The consequences indicated the volatility spillover effects between topographic point and hereafters in MSCI, nevertheless there was volatility spillover from topographic point to hereafters in TAISEX. Therefore, volatility of hereafters market could be clarified by the growing rate of hereafters in trading activities.

Maghyereh and Kandari ( 2007 ) were analyzing the relationship between oil monetary values and stock market in Gulf Cooperation Council ( GCC ) states. This research conducted was based on the information from 1 January 1996 to 31 December 2003. They adopted new innovate method – rank trials of nonlinear co-integration to observe the co-integration when the error-correction mechanism were found to be nonlinear. They found that there was no relationship between oil monetary values and the GCC stocks market returns. Furthermore, stock monetary value indices were affected by oil monetary values in GCC states which was in a nonlinear mold of the relationship in the market.

Switzer and Khoury ( 2007 ) examined the efficiency of market for New York Mercantile Exchange ( NYMEX ) of petroleum oil hereafters market during the utmost conditional volatility which was from January 1986 to April 2005. Fama arrested development had been implemented and proved that the footing, the premium and the alteration in future topographic point monetary value were stationary and therefore this arrested development was good specified. In add-on, random walk forecaster ‘s theoretical account and hereafters contract were used to prove hereafters monetary values of NYMEX utilizing day-to-day informations. The consequence showed that both were important. Besides, rough oil hereafters monetary values were found to be co-integrated with topographic point monetary value and indifferent forecasters of hereafters monetary values. Both monetary values presented asymmetric volatility features during these periods.

Li ( 2008 ) examined the relationship between topographic point and hereafters market volatility in three markets, which were S & A ; P 500, FTSE 100 and DAX, and Brazilian BOVESPA and Hungarian BSI with day-to-day informations from April 3, 1995 to December 12, 2005. The Vector Error Correction Model ( VECM ) was adopted to look into the long tally relationship between topographic point and hereafters markets. In footings of low volatility, the alterations in monetary value occurred in topographic point market. In footings of high volatility, the alteration in monetary values does depend on the hereafters market. The consequences showed there was a high discrepancy alteration on topographic point and hereafters market, nevertheless it was weak correlativity between both markets due to the hazard antipathy of investors who were sensitive to the monetary value of disequilibrium.

Kao and Wan ( 2009 ) compared monetary value find relationship between topographic point and hereafters monetary value for United States and United Kingdom ‘s gas markets. For the sample period of June 26, 1998 to December 31, 2007, they employed Vector Error Correction Model ( VECM ) to prove on their hypothesis. Based on their findings, U.S hereafters market led the monetary value find procedure in footings of higher trading volume and lower dealing cost. Furthermore, there was a positive correlativity between volatility in U.S hereafters market and its returns due to presence of asymmetric volatility spillover effects. As a decision, U.S hereafters market is the chief dominant for monetary value find and leads topographic point monetary value.

Maslyuk and Smyth ( 2009 ) have studied the co-integrating relationship between petroleum oil topographic point and hereafters markets. They selected the US WTI and UK Brent daily topographic point and hereafters monetary values which covered the period from January 1991 to November 2008. They employed residual-based co-integration trial to analyze on long tally relationship of topographic point and hereafters with the structural interruption. The consequences indicated there was a long tally relationship between both markets. This implied that the structural interruption alteration has affected the equivocator on universe oil market. They concluded that the hereafter research could be used as panel co-integration techniques to farther probe of these relationships.

Choi and Hammoudeh ( 2010 ) studied the correlativity between WTI oil, Brent oil, gold, Ag, Cu and S & A ; P index in U.S with the hebdomadal information from January 2, 1990 to May 1, 2006. Markov-switching GARCH theoretical accounts were applied to look into the high or low volatility of return and correlativity between topographic point and hereafters markets. The consequences show that the low volatility return is higher than the high volatility return between all the trade goods and stock market, excepting the Gold market. They claimed that these findings on the low volatility are more suited for risk-averse investors among these trade goods with the topographic point and hereafters market. Besides, the correlativity alterations in the trade goods due to cut downing their hedge in the portfolios. Hence, it is easier to utilize pecuniary policy for policy shapers in order to forestall rising prices.

Lean, McAleer, and Wong ( 2010 ) examined the market efficiency of oil topographic point and hereafters monetary values. WTI petroleum topographic point monetary values covered the period from January 1, 1989 to June 30, 2008. They employed mean-variance ( MV ) and stochastic laterality ( SD ) to analyze this market efficiency. In footings of MV, the consequences showed no strong grounds to back up the market efficiency. In footings of SD, there was significance in topographic point and hereafters market efficiency. This implied that there is no arbitrage chance between both markets. Therefore, they concluded that SD was more reasonable to the investors in determination devising.

Ye, Zyren, Shore and Lee ( 2010 ) examined the altering relationship between topographic point and hereafters in short and long term adulthood crude oil markets with monthly informations from January 2000 to the center of 2009. The two theories were adopted to back up the grounds, which were caput and tail hereafters contract. They claimed that expected hereafters monetary values increased in topographic point monetary value on physical and fiscal plus with the longer clip period, frailty versa. The consequences indicated the significance in topographic point monetary value and volume while reacting to caput and tail markets. However, they examined the market place of topographic point markets, the topographic point monetary values expected to be decreased in the hereafter. In short, the short or long place does depend on the topographic point and hereafters market information.

Jawadi and Bellalah ( 2011 ) studied the relationships on whether the oil was affected by the stock monetary value fluctuations in France, Mexico, and USA. The monthly informations of stock indexes were used in sing informations from December 1987 to March 2008. While the methodological analysis used was non-linear econometric mold, the consequences indicated that the stock return had an impact on the oil market and non-linear relationship among these three states significantly. They concluded that there were non-linearity and non-linear average reversion between oil and stock monetary value due to traveling with the different way.

Liu and Wan ( 2011 ) examined the correlativities between return of WTI topographic point and hereafters monetary values. They used day-to-day topographic point and hereafters monetary values of West Texas Intermediate ( WTI ) crude oil from Jan 2, 1990 to Dec 31, 2009. Furthermore, they used the rolled sample trial and found that external factors such as the Gulf War and fiscal crisis effects were affected by these correlativities. They besides employed Ljung-Box trial and found that that the cross-correlations were important and implied that there were long-range cross-related between topographic point and hereafters returns.

Lee and Zeng ( 2011 ) examined the relationship between topographic point and hereafters oil monetary values of West Texas Intermediate ( WTI ) and covered the day-to-day informations from January 2, 1986 to July 6, 2009. They employed quantile cointegrating arrested development and found the long-term relationships between topographic point and hereafters oil monetary values. This relationship has important derived functions among hereafters adulthoods and the public presentation of topographic point markets. From the Granger-causalities trial, they found topographic point monetary values have leaded the hereafters monetary values and implied that market participants place more focal point on topographic point markets than hereafters oil market.

Liu, Chen, and Su ( 2011 ) , examine the nonlinear relationship between topographic point and hereafters oil market in WTI. The day-to-day informations covered from 1 January, 2004 to 30 September, 2009. They employed bivariate threshold error-correction theoretical account ( TECM ) and GJR-GARCH theoretical account to analyze on short and long tally relationship between topographic point and hereafters market. The consequences indicated that there was long tally relationship between both markets. This implied that there was interaction consequence between these two markets. Therefore, the equivocators, speculators, and fiscal directors could be applied in their investment and hedge on hereafters market.

Wang, Wei and Wu ( 2011 ) examined cross-correlation and auto-correlation between topographic point and hereafters markets of West Texas Intermediate ( WTI ) crude oil day-to-day informations from 2 January 1990 to 9 March 2010. They applied Multifractal Detrended cross correlativity analysis ( MF-DCCA ) to find the tendencies and discrepancy of topographic point and hereafters. The consequences showed the cross correlativity between topographic point and hereafters monetary value which were by and large higher than the autocorrelation for each series. These indicated there was significance in cross-correlation with topographic point and hereafters market. Hence, cross-correlation and auto-correlation were multi-fractal and showed that the cross-correlation was larger than the auto-correlation in short term but lower in the long term. In short, the past information could be used for prediction in hereafters markets.

Lei and Yong ( 2011 ) have examined the belongingss of Brent petroleum oil topographic point and hereafters monetary values with day-to-day informations covered from Jan 1, 2002 to Dec 31, 2009. They employed the stochastic unit root ( STUR ) and stochastic co-integration to analyze the long tally relationship during the fiscal crisis. They found that both oil topographic point and hereafters with STUR and alterations of clip auto-regressive coefficients were important, and implied that it was utile for prediction and hazard direction. In add-on, they found that there was long tally relationship between both markets ; therefore it could be fudging the oil market hazard. In short, they claimed that the STUR and co-integration are the important tools to analyze the series theoretical account were on strong volatility.

Huyghebaert and Wang ( 2010 ) examined the co-integration and causality of the seven major seven stock exchanges for the pre, during and post Asiatic fiscal crisis on 1997-1998 which were Shanghai SE Composite, Shenzhen SE Composite, Hong Kong Hang Seng, Taiwanese SE Weighted, Singaporean Strait Times, South Korean SE Composite, Nipponese Nikkei 225 Stock Average and US S & A ; P 500 Composite Index. The day-to-day informations covered from 1 July 1992 to 30 June 2003. They adopted the VAR theoretical account which studied the long tally relationship. Their findings of this survey were the crisis in Hong Kong and Singapore which significantly led to dazes compared to other East Asiatic states. After the crisis, Singapore and Hong Kong mostly affected other East Asiatic states whereas USA is the state which strongly influenced the stock return in East Asiatic states. Therefore, it was the macroeconomics factors affected in globalisation.

2.2 Bi-directional relationship between topographic point and hereafters market

Tse ( 1995 ) examined lead-lag relationship between topographic point and future monetary value of the Nikkei Stock Exchange from December 1988 to April 1993. Error rectification theoretical account was used to analyse this relationship and it was found that both monetary values moved at the same time, whereby, the short term accommodation in the topographic point index had been affected by a lagged alteration in the hereafters monetary value, non frailty versa. In add-on, vector autoregressive ( VAR ) and uni-variate clip series methods were used to calculate the topographic point monetary value and do a comparing with the mistake rectification theoretical account. Decisions showed that mistake rectification theoretical account was the best for calculating while the vector autoregressive theoretical account was found better than the martingale theoretical account, whereas the uni-variate clip series method presented the worst consequences.

Kavussanos and Visvikis ( 2004 ) examined the lead-lag relationships between topographic point and hereafters markets in Atlantic and Pacific path markets. They employed the Vector Equilibrium ( VECM ) theoretical account and used sample period from 16 January 1997 to 31 July 2000. Findingss implied that hereafters monetary value is an of import beginning of information and leads topographic point monetary value in monetary value find. In add-on, topographic point monetary value besides has higher dealing cost than hereafters monetary values and contributes to higher volatility. Therefore, there is bidirectional causality bing between hereafters and topographic point monetary values in the Atlantic and Pacific paths.

Hasan ( 2005 ) examined the lead-lag relationship between topographic point and hereafters market in United States and United Kingdom. For the sample period of July 22, 1983 to August 11, 1992, consequences implied that there was a high correlativity between topographic point and hereafters markets for United Kingdom market via additive farmer causality trial. Their determination for United States market besides indicated a bi-directional relationship between topographic point and hereafters return. Based on these consequences, they concluded that feedback relationship existed between topographic point and hereafters return for both states. Further, this relationship deduction is of import for efficient market hypothesis, monetary value find and anticipation of cost-of-carry theoretical account.

Hseu, Chung and Sun ( 2007 ) examined the intra-day monetary value of S & A ; P 500, Nasdaq-100 and DJIA from April 1, 1998 to March 31, 2002 on New York Stock Exchange ( NYSE ) . They applied Vector Error Correction Model ( VECM ) and co-integration to analyze the long tally relationship between topographic point and hereafters market. The consequences indicated bing bi-directional and long tally relationship between the three topographic point and hereafters market. Therefore, they concluded that the stock return had changed in intrinsic value.

Chang and Lee ( 2008 ) investigated the causal relationship between topographic point and hereafters market. The day-to-day informations covered from January 2001 to May 2005 of Taiwan Stock Exchange. The survey was based on the threshold error-correction theoretical account ( TECM ) to analyze the long tally relationship. Their findings indicated the bi-directional causality relationship between the topographic point and hereafters market in the short tally. However, there were significantly negative divergences correlated between the topographic point and hereafters market which were being affected by negative divergences while there were no correlative positive divergences on the topographic point market. They concluded that they should be gettable to the investors and fiscal establishment in order to put in long term portfolio investings.

Ozen, Bozdogan, and Zugul ( 2009 ) investigated the causality relationship between topographic point and hereafters monetary values of Izmir Derivatives Exchange ( VOB ) and Istanbul Stock Exchange Index 30 ( A°MKB30 ) from the Turkey stock exchange market. The sample period covered from 4 February 2005 to 27 February 2009. They employed Error rectification theoretical accounts ( VECM ) which were used to analyze whether at that place occurred a causality relation between topographic point and IMKB 30 hereafters. The consequence indicated the long term bidirectional causality relationship occurred among topographic point and IMKB 30 hereafters monetary values in the long tally. However, the one-sided causality relationship merely exists in the short tally.

Srinivasan and Bhat ( 2009 ) examined on the relationship between topographic point and hereafters of 20 one selected banking stocks in National Stock Exchange ( NSE ) . The sample period covered from 27 May, 2005 to 29 May, 2008. They adopted the co-integration and VECM theoretical account studied the lead-lag relationship between these markets. The consequences indicated there was hereafters lead topographic point on nine selected stocks, topographic point lead hereafters on another six stocks and feedback relationship on the remainder. These indicated that bi-directional relationship exists on these selected stocks. It is besides implied that it acted as a monetary value find and received rapid information on the market efficiency. Therefore, they concluded that monetary value find responds to each other, nevertheless, it spreads in bank activities due to dealing costs, initial border, and leverage place.

Athanasios ( 2010 ) examined the lead-lag relationship between hereafters market and topographic point market in Athens stock exchange ( ASE ) from the period from 2 January 2000 to 30 May 2008. The consecutive dependance of volatility or conditional discrepancy had been forecasted utilizing GARCH. The intent of following GARCH was that it could offer a trustable appraisal for volatility, gaining control the inclination in plus returns for volatility bunch and equalise the possible negative correlativity between future volatility and topographic point returns. Besides, farmer causality trial was applied in structural equation theoretical account ( SEM ) to analyze the dynamic effects of topographic point and future returns in footings of volatility. Finally, he concluded that topographic point and hereafters markets were fluctuated but good characterized by GARCH procedure. With SEM, it can beef up the farmer causality trial which could be occurred when there were unidirectional and bidirectional causal effects between the market indices and volatilities.

Apergis ( 2010 ) studied the relationship between oil topographic point and hereafters market of NYNEX and conditional volatilities from January 2000 to April 2009. VECM was used to analyze the non-linearity of the relationship. The consequences showed that nonlinearities existed both in agencies and conditional volatilities between oil topographic point and future markets. Non-linear causality in volatilities implied there was bi-directional relationship, therefore it was the important tool to policy shapers, hedge fund directors, portfolio directors in order to do precise determinations.

Ahmad, Shah, and Shah ( 2010 ) studied the relationship between topographic point and hereafters stock market in Pakistan from sample period of July, 2001 to January, 2010. Findingss from GARCH theoretical account have provided the being of volatility bunch. This is due to high volatility for topographic point and hereafters market from past period which will besides take to high volatility in the current period. Furthermore, consequences besides exhibit bi-directional relationship between the two markets. However, they found that chances of negative returns are higher than positive returns for both topographic point and hereafters market during the sample period. The ground behind this is due to the 2008 stock crisis and political instability which caused the stock exchange market to crash. Hence, high downside hazard from stock market returns during that period worsened the topographic point and hereafters stock market return in Pakistan.

Anoruo ( 2011 ) examined the one-dimensionality and nonlinearity causal relationships between topographic point and hereafters in S & A ; P crude oil market. The period of informations covered from February 1974 through December 2009. They employed standard VAR and the Bivariate Mackey- Glass ( M-G ) theoretical account studied the non additive causal relationship between topographic point and hereafters crude oil market. The consequences indicated that there was bidirectional relationship between topographic point and hereafters crude oil market. This implied that the volatility of topographic point and hereafters return was non-linear. In decision, the past information can non be used for calculating due to market inefficiency.

Mariam ( 2011 ) studied the causal relationship, long tally relationship and market efficiency of natural gas in NYMEX topographic point monetary values from November 1996 to December 2004 and hereafters monetary values from 1999 to 2004. Granger causality and co-integration was analyzed for long tally relationship between topographic point and hereafters markets. Consequences showed that topographic point lead hereafters in the short tally and hereafters lead topographic point in the long tally. At the same clip, analyzing on co-integration trial has found long run relationship between topographic point and hereafters market. This implied that bi-directional relationship exists on both markets, hence topographic point and hereafters move with the same way due to transit and dealing costs in the long tally equilibrium.

Diaw and Olivero ( 2011 ) investigated the kineticss relationship of CAC 40 between topographic point and hereafters markets. There are separated, pre and during crisis, into two bomber periods which were September 2006 and October 2008. They employed three theoretical accounts which were GJR-GARCH, EAR-GARCH and EC-EGARCH examined on the short tally and long tally dynamic relationship. The consequences indicated that there was low volatility during pre crisis, nevertheless, high volatility during crisis tested on three theoretical accounts. This implied that they could bring forth unnatural returns and hereafters lead topographic point during pre crisis, nevertheless, spot lead hereafters during crisis. Therefore, there was bing the bi-directional relationship between topographic point and hereafters markets. In short, the volatility effects could assist the investors in fudging during crisis.

Choudhary and Bajaj ( 2012 ) examined the lead slowdown relationship among topographic point and hereafters markets for selected 30 one securities of S & A ; P CNX Nifty on National Stock Exchange ( NSE ) . The day-to-day informations covered from April 2010 to March 2011. Johanson trial and VECM were adopted to analyze the long tally relationship among these single securities. The consequences indicated that hereafters lead topographic point on 12 securities and topographic point lead hereafters for the remainder 19 securities. These implied that bi-directional relationship exists between these securities. Therefore, they concluded that topographic point and hereafters are of import in monetary value find due to existence of utile information to the investors.

2.3 Uni-directional relationship between topographic point and hereafters market ( spot lead hereafters )

Bekiros and Diks ( 2008 ) examined the causal relationship between topographic point and hereafters market in West Texas Intermediate ( WTI ) petroleum oil and NYMEX hereafters market for two sample periods. The sample periods covered from October 21, 1991 to October 29 for the first period and November 1, 1999 to October 30, 2007 for the 2nd period. They applied the Granger Causality trial for additive and non-linear of the topographic point and hereafters monetary values. They found that there is uni-directional causal additive relationship due to more volatility on topographic point and hereafters monetary values of rough oil in the 2nd period, topographic point tend to take hereafters monetary values. At the same clip, non-linear causal relationship in both sample periods was tested but consequences showed that it was merely uni-directional in the first period and had vanished in the 2nd period. Therefore, they concluded that the speculators would organize their outlook based on the topographic point monetary value and calculate the expected hereafters monetary values due to its importance to prove the market efficiency.

Srinivasan and Deo ( 2009 ) examined on relationship between topographic point and hereafters markets in Multi Commodity Exchange of India ( MCX ) and National Commodity Derivatives Exchange ( NCDEX ) from January 1, 2005 to December 31, 2008. Johanson Co-integration trial and Vector Error Correction Mechanism ( VECM ) were adopted to analyze the long tally relationship between topographic point and Mini Gold hereafters market. The consequences indicated at that place existed the long tally relationship and Mini Gold topographic point lead hereafters. Therefore, they concluded that investors prefer topographic point instead than hereafters market due to liquidness in gold market.

Bu ( 2011 ) surveies the impact of speculator ‘s trading activities to the volatility of petroleum oil hereafters return in China. He used hebdomadal informations from WTI ( NYMEX ) hereafters monetary values over the period from June 13, 2006 to December 28, 2010 and employed Granger causality method based on GARCH ( 1, 1 ) theoretical account to analyze the hypothesis. Findingss have shown a unidirectional Granger causality relationship, whereby rough oil hereafters return will take to speculator ‘s trading place. This consequence implied that speculators are feedback bargainers that followed the tendencies of hereafters return in the market. On the other manus, he besides found that there is a bi-directional relationship between hereafters return and net long place held by speculators. This besides implied that alterations of place held by speculators will give impact to alterations of petroleum oil monetary value volatility. Furthermore, there was a big volatility alteration in petroleum oil hereafters return during the fiscal crisis. Subsequently, this consequence had caused hereafters monetary values to worsen immediately with grounds of high volatility bunch.

Ghalayini ( 2011 ) studied the causal relationship between volatility of topographic point oil market and alterations of hereafters market trading activity. They used West Texas Intermediate ( WTI ) hebdomadally information from January of 2000 to December of 2010. They employed Granger Causality trial which examined the causal relationship between topographic point and hereafters market. The consequences showed there was uni-directional causality topographic point lead hereafters and concluded that topographic point carried the information to hereafters for calculating. Therefore, the hazards of hereafters could be determined by the topographic point market.

Srinivasan ( 2009 ) studied the lead slowdown relationship between topographic point and hereafters monetary values of nine selected oil and gas stocks on National Stock Exchange ( NSE ) of India. The day-to-day informations sample period covered from May 12, 2005 to January 29, 2009. Johansen co-integration trial and Vector Error Correction Model ( VECM ) used to carry on lead slowdown relationship among the selected stocks. The consequences indicated that there was a long tally relationship and bidirectional relationship among topographic point and hereafters monetary values of four selected stocks, nevertheless hereafters lead topographic point monetary value for three selected stocks and topographic point lead hereafters monetary value in two of the selected stocks in India.

2.4 Uni-directional relationship between topographic point and hereafters market ( hereafters lead topographic point )

Schwarz and Szakmary ( 1994 ) investigated directional relationship between topographic point and hereafters monetary value in rough oil market which are traded on the New York Mercantile Exchange ( NYMEX ) . For the sample period of January 1, 1984, to May 15, 1991, they used farmer causality trial to analyze the relationship. Finding had shown that topographic point monetary values followed hereafters monetary values of rough oil. This determination point out that petroleum oil hereafters monetary value is the monetary value leading and investors tend to put in topographic point market based on information they obtain from hereafters returns. In decision, hereafters monetary value of petroleum oil significantly gives positive impact to growing and success of the energy hereafters contracts traded at the NYMEX.

Silvapulle and Moosa ( 1999 ) investigated the lead-lag relationship between hereafters monetary value and topographic point monetary value. As such, they compared the additive and nonlinear causality proving methods for West Texas Intermediate ( WTI ) crude oil in the United States. Based on their additive causality consequences, they found that hereafters monetary values lead topographic point monetary values. In contrast, opposite determination from the nonlinear causality attack suggests that hereafters and topographic point monetary values have a bi-directional causal relationship. The difference between these consequences is because of the alterations of investor ‘s reaction towards new information sing returns.

Zhong, Darrat and Otero ( 2004 ) examined the monetary value find and volatility of spillover effects on the Mexican stock market with the day-to-day informations covered from 15 April 1999 to 24 July 2002. They employed bivariate EC-GARCH theoretical account which studied the spillover consequence with conditional mean and discrepancy between topographic point and hereafters market. The consequences indicated that there was hereafters lead topographic point in the short tally and occurred arbitrage chance in the long tally. This implied that the hereafters monetary values were more antiphonal than the topographic point monetary values. Therefore, the information of hereafters market in Mexico does depend on past information.

Lee, Chiu, and Lee ( 2007 ) analyzed the lead-lag relationship between topographic point and hereafters return traded in CME-Nikkei 225 and SIMMEX-Nikkei 225 in Singapore and the United States severally. They employed Granger causality trial for the period of January 5, 1994 to December 31, 2003. Findingss implied that there is a unidirectional relationship from hereafters returns to descry returns due to low overall dealing costs and high purchase in the hereafters market.

Batchelor, Alizadeh, and Visvikis ( 2007 ) examined the relationship between topographic point and hereafters freight rates in Atlantic and Pacific paths. They used several clip series theoretical account such as Vector Equilibrium ( VECM ) theoretical account, ARIMA theoretical account, and Vector Auto-regression ( VAR ) and claimed that topographic point and hereafters monetary values are co-integrated from sample period of 16 January 1997 to 31 July 2000. Besides, findings from these three theoretical accounts implied that forward returns would calculate topographic point returns. They further argued that ARIMA theoretical account was a better prediction tool to foretell topographic point and hereafters rates when the underlying market construction was turning.

Floros and Vougas ( 2007 ) examined the lead slowdown relationship among topographic point and hereafters of Athens Derivatives Exchange ( ADEX ) in Greece. There were separated into two bomber periods which were FTSE/ASE 20 ( August 1999-August 2001 ) and FTSE/ASE Mid 40 ( January 2000-August 2001 ) . The Bivariate-GARCH methods were used to analyze these relationships.From their findings, hereafters lead topographic point due to hereafters markets which were lower dealing costs and more liquid than the topographic point market. Therefore, it was utile to speculators, bargainers and fiscal directors in trading activities.

Kavussanos, Visvikis and Alexakis ( 2008 ) studied on additive and non-linear relationship in topographic point and hereafters markets in FTSE/ATHEX 20 and FTSE/ATHEX 40 on Greece ‘s derivative market from February 2000 to June 2003, and FTSE/ATHEX market from July 2000 to June 2003 in these two sample period. They implemented Johanson cointegration trial and Generalized Autoregressive Heteroskedasticity ( GARCH ) theoretical account to find the long tally relationship. The consequences indicated the spillover effects from hereafters were important but spot lead hereafters was undistinguished due to hereafters market which was less expensive compared to topographic point markets. They recommended that investors should put in hereafters contracts due to the hereafters market more liquid than the topographic point markets. Finally, they claimed that hereafters monetary values were utile for hazard direction, portfolio direction and budget planning determinations.

Huang, Yang and Hwang ( 2009 ) examined on the dynamic relationship between topographic point and hereafters monetary values, whether in additive or non-linear causal relationship in WTI. The sample period of the WTI informations are spread to three periods, which were period 1 ( 01/02/1986-02/28/1991 ) , period-2 ( 03/31/1991-08/31/2001 ) , and period-3 ( 09/01/2001-04/30/2007 ) . They applied cost-of-carry hypothesis which studied the topographic point and hereafters reacting to the arbitrager. The consequences indicated that the topographic point monetary values were higher than hereafters monetary values. They claimed that significantly between topographic point and hereafters, hereafters lead topographic point monetary values alterations. This implied that there was higher dealing cost in topographic point markets, nevertheless, they found that there was no relationship between topographic point and hereafters with no arbitrage chance. Therefore, the arbitragers sold the hereafters contracts and purchased the topographic point contracts.

Luengo ( 2009 ) examined the causal relationship between topographic point and hereafters market S & A ; P 500 volatility with day-to-day informations covered from January 17, 2000 to November 26, 2002. Vector autoregressive ( VAR ) theoretical account was adopted to analyze the volatility of interaction effects of topographic point and hereafters markets. The consequence indicated that hereafters lead topographic point due to descry market was more dearly-won while trading in the market. Therefore, the research worker concluded that hereafters market is a leader with handiness of new information to topographic point markets. In other words, current topographic point markets do depend on past information of hereafters market.

Kaufmann and Ullman ( 2009 ) examined the causal relationship between petroleum oil monetary values in North America, Europe, Africa, and the Middle East. They compiled a series of day-to-day topographic point and hereafters monetary value informations for petroleum oil for the sample period of January 1986 to March 2007. Findingss from Vector Error Correction Model ( VECM ) indicated a unidirectional causal relationship between topographic point and hereafters return. Consequently, it is found that alterations in hereafters monetary value affect topographic point monetary value of rough oil. Furthermore, this consequence produced an upward force per unit area to oil monetary values because of high demand for guess. However, addition in monetary value would besides take to decelerate economic growing. Therefore, research workers suggest that market fundamentality is an of import factor to find both returns.

Tse and Chan ( 2010 ) studied the lead slowdown relationship of S & A ; P 500 topographic point and hereafters markets from 5 March 2004 to 1 July 2004. They employed the Threshold Regression Model ( TRM ) to look into the causal consequence of non-linear between topographic point and hereafters markets. They found that when the market status was good, the hereafters markets were more efficaciously served as monetary value find map, frailty versa. They besides observed that when the market was in bull or bear, the consequence of hereafters taking the topographic point market would be more obvious due to more market information.

Mall, Bal and Mishra ( 2012 ) studied causal relationship between topographic point and hereafters market in India. They used day-to-day informations of National Stock Exchange ( NSE ) from June 12, 2000 to May 2011. They employed VECM which examined the short tally relationship and co-integration trial which studied the long tally relationship between these two markets. The consequences indicated hereafters lead the topographic point during long periods but no relationship during short periods. They claimed that it was helpful for investors to calculate since the market was efficient.

2.5 Decision

In a nutshell, we study the correlativity of topographic point and hereafters market in order to place the volatility of stock market public presentation during the normal and crisis period. In our result, it indicates the high volatility during crisis and low volatility before and after crisis. The market is efficient when there is more market information on topographic point and hereafters, and acts as a monetary value leading to each other. However, the old surveies showed that they were helpful to investors to calculate the hereafters monetary values by utilizing bing marketinformation to bring forth the unnatural net income. In short, there are bi-directional or uni-directional relationships before, during and after crisis.

Chapter 3: DATA DESCRIPTION AND METHODOLOGY

3.0 Overview

In this chapter, we emphasize on how we conduct this survey in order to accomplish the aims of our survey. For the first subdivision, we will explicate the beginning and the type of informations used. Furthermore, we will explicate the variable that will be used in our survey. Then, we will explicate sing the application of the theoretical account and trial that we will transport out to look into the relationship between topographic point and hereafters monetary values.

3.1 Datas

We conduct this survey utilizing the day-to-day shutting informations of topographic point and hereafters monetary values of Kuala Lumpur options and fiscal hereafters exchange ( KLOFFE ) . We obtain the information from Thomson Reuters Data Stream with 3272 observations, the sample period covered from 15th December 1995 to 21th August 2009. Harmonizing to Huyghebaert and Wang ( 2010 ) , the pre Asiatic fiscal crisis sample period covered before June 30, 1997, during crisis from July 1, 1997 to June 30, 1998 and post crisis after June 30, 1998. In order to analyze the relationship of topographic point and hereafters monetary values towards Asiatic Financial Crisis, this sample period is divided into three bomber periods which are pre-Asian Financial crisis ( 15th December 1995 to 3rd July 1997 ) , during Asiatic Financial Crisis ( 4th July 1997 to 1stSeptember 1998 ) and post-Asian Financial Crisis ( 2nd September 1998 to 21st August 2009 ) .

3.1.1 Variables

In this survey, we emphasize on two series merely, which are the day-to-day shutting topographic point and hereafters monetary values ( RM ) . Both series will be transformed into natural logarithms form.This transmutation is to cut down the fluctuation of series.

) ( 1 )

) ( 2 )

Where Sr denotes as the topographic point return and sp denotes as the topographic point monetary values. On the other manus, Fr denotes as the hereafters return and fp denotes as the hereafters monetary values.

3.2 Methodology

3.2.1 Unit root trial

Harmonizing to Granger and Newbold ( 1974 ) , an being of non-stationary series in arrested development theoretical account would take to specious appraisal and invalid hypothesis proving illations. Therefore, this survey attempts to carry on unit root trials to look into the stationarity of each series in each period. As such, two unit root trials were applied in this survey, viz. augmented Dickey-Fuller, ADF trial ( 1981 ) and Phillips-Perron, PP trial ( 1988 ) . This survey will prove the stationary for day-to-day shutting stock monetary value in the natural logarithms signifier in stock market with whole period and three bomber periods.

3.2.1.1 Augmented Dickey-Fuller ( ADF ) trial

Augmented Dickey-Fuller ( ADF ) is an drawn-out process of DF trial by adding lagged value of dependant variables which is developed by Dickey and Fuller ( 1981 ) in order to extinguish autocorrelation. This trial will add the lagged value of dependent variable, in the equation in order to accept the instance when is correlated. Therefore, these theoretical accounts can be shown in equation ( 3 ) and ( 4 ) severally as below which include intercept and intercept and tendency which is in flat signifier.

With intercept:

With intercept and tendency:

Where is a changeless, is the coefficient on a tendency and is the lagged order of the autoregressive procedure, is the pure white noise mistake term. In both equation ( 3 ) and ( 4 ) , is denoted as ln day-to-day monetary value ( lnP ) , is flat signifier for lnP, and where, it indicates unity and unit root. The slowdown length for dependent variable is based on Schwarz Information Criterion, SIC. In order to prove stationary of and, the void hypothesis is and alternate hypothesis is. The void hypothesis can be rejected if DF statistic is more negative than critical value. In this respects, it can be concluded that the series is stationary.

3.2.1.2 Phillips-Perron ( PP ) trial

PP trial is developed by Phillips and Perron ( 1988 ) which generalized the ADF trial by leting the premise on the distribution of mistakes. To get by with the consecutive correlativity of the error term without adding lagged difference footings is by utilizing nonparametric statistical methods. The PP trial applies the same asymptotic distribution as ADF trial. Therefore, these theoretical accounts can be shown equation ( 5 ) and ( 6 ) severally as below which include intercept and intercept and tendency which are in flat signifier.

With intercept:

( 5 )

With intercept and tendency:

Where is a changeless, is the coefficient on a clip tendency, and is the pure white noise mistake term. In both equation ( 5 ) and ( 6 ) , is denoted as ln day-to-day monetary value ( lnP ) . is the flat signifier for lnP, and where, it indicates unity and unit root. In order to prove stationary of and, the void hypothesis is while the alternate hypothesis is. The void hypothesis can be rejected if the trial statistic is less than the critical value. In this respects, it can reason that the series is stationary.

3.2.2 Cross-correlation Function ( CCF ) attack

Cross-correlation map ( CCF ) trial is used to look into the nonlinear causality between topographic point and hereafters markets. This attack is developed by Cheung and Ng ( 1996 ) . This attack is utile to analyze with the big figure of clip series and predicts the future value from bing information. Before this attack is used, we should carry on two analyses which are univariate and augmented analysis. Univariate analysis is to find the causal consequence between topographic point and hereafters return in conditional mean and conditional discrepancy without taking spillover consequence into history. Apart from that, augmented analysis is to look into the interaction and robust alterations with the spillover effects between topographic point and hereafters returns.

3.2.2.1 Univariate Analysis

Univariate analysis is use to analyse the spotand hereafters markets based on their past values. We separated the whole period and station crisis by adding the silent person variable due to structural alteration, pre and during without adding silent person variable into our equation. Therefore, these theoretical accounts can be shown below which show includes silent person and without dummy variable in the different periods.

Without Dummy variable

Without silent person, where is changeless, stand for the topographic point return and stand for the hereafters return in average equation and stand for the discrepancy of topographic point and hereafters return. is the lagged order of topographic point and hereafters return. The equation shown in ( 7 ) and ( 8 ) which include ARMA, nevertheless, the equation ( 9 ) and ( 10 ) included ARCH and GARCH in topographic point and hereafters return, and sum up is less than one represent the doggedness of the volatility. With silent person, the equation has shown in ( 13 ) and ( 14 ) , is the coefficient of silent person variable. and presume to be near to zero or in white noise mistake term.

With Dummy Variable

Dum 1= structural alteration, 0= otherwise

3.2.2.2 Augmented Analysis

Augmented analysis with spillover effects between topographic point and hereafters monetary values can be improved through higher log likeliness and lower information standards. These theoretical accounts can be shown below which includes the interaction consequence between topographic point and hereafters with silent person and without dummy variables.

Without silent person variable

Without silent person, where is changeless, and take the interaction consequence into history between topographic point and hereafters return in equation ( 15 ) and ( 16 ) . and stand for the discrepancy of topographic point and hereafters return with the interaction consequence was shown in equation ( 17 ) and ( 18 ) . With silent person, the average equation was shown in ( 19 ) and ( 20 ) while the discrepancy equation has shown in ( 21 ) and ( 22 ) . is the coefficient of silent person variable. and presume to be near to zero or in white noise mistake term.

With silent person variable

As in the univariate and augmented analysis, this non-linearity trial is tested based on CCF standardized and square standardised remainders with mean and discrepancy at the same time. The advantage of this trial is that it is non at the same time involved and it is easy to implement. ARMA is normally used to place the series of the theoretical account autocorrelation ( ACF ) and partial autocorrelation ( PACF ) reacting to the slowdown length of the series. On the other manus, GARCH theoretical account is the conditional discrepancy of the perturbation of the sequence of ARMA procedure. If our theoretical account is equal, the ACF and PACF for standardised residuary or square standardized residuary indicate that there is white noise procedure. As such, the adequateness can be checked by utilizing the Ljung-Box statistic from the square of standardised remainders shown in equation ( 23 ) and ( 24 ) to find the autocorrelation job.

( 24 )

The trial statistic can be computed as below

TS = ( 25 )

The void hypothesis of this trial states that there is no mean or discrepancy causal consequence between both series can be rejected if the trial statistic is greater than the critical value, where the critical value follows normal distribution. So we conclude that there exists the causal relationship between topographic point and hereafters returns in mean and discrepancy.

Chapter 4: EMPIRICAL Consequence

4.0 Introduction

This chapter studies and discusses the consequences of the relationship between topographic point and hereafters markets during the whole and three sub-periods. First, descriptive statistics and unit root trials are carried out in order to analyze the features of topographic point and hereafters return. Besides, the findings from Cross Correlation Function ( CCF ) attack based on univariate and augmented analysis are to happen out the causal consequence between topographic point and hereafters returns. The lag length of CCF showing the way consequence in topographic point and hereafters return will be presented. Based on the 2nd and 3rd aims, the non-linearity trial based on CCF attack is implemented in each period to analyze the information flow between both markets. The non-linearity trial based on univariate and augmented analysis will be presented and interpreted in the last subdivision of this chapter.

4.1 Descriptive Statisticss

Table 1 Descriptive Statisticss

Whole Time period

Pre Crisis

During Crisis

Post Crisis

Second

F

Second

F

Second

F

Second

Mean

4.77E-05

4.31E-05

0.0003

0.0002

-0.0039

-0.0040

0.0003

Maximum

0.2143

0.4880

0.0472

0.0486

0.2143

0.2019

0.1713

Minimum

-0.1846

-0.2391

-0.0424

-0.0422

-0.1845

-0.1333

-0.1168

Standard

Deviation

0.0178

0.0199

0.0101

0.0101

0.0390

0.0386

0.0155

Lopsidedness

0.1923

3.9522

-0.0972

0.0642

0.2037

0.4225

0.4005

Kurtosis

20.4241

125.8380

5.9515

6.5284

8.5111

7.1742

14.7078

Jarque-Bera

41398.46

2065044

112.2814

159.9776

278.6574

165.5113

15733.72

Table 1 shows the descriptive statistics of topographic point and hereafters return for whole and three sub-periods. The kurtosis of the topographic point and hereafters return indicates the kurtosis is greater than 3.0 of all periods, so it is known as leptokurtosis. Harmonizing to Vosvrda and Zikes ( 2004 ) , there is really of import leptokurtosis for farther surveies on the features and appraisal on topographic point and hereafters market. The Jacque-Bera trial indicates the normal premise of the topographic point and hereafters return. Consequence from Jacque-Bera statistic shows that we reject the void hypothesis of normalcy premise. Therefore we conclude that both returns are non usually distributed.

4.2 Unit root trials

Table 2 Unit root trials consequences

Order