International Price Relationship and Volatility Transmission Between Stock Index and Stock Index Futures

This study investigates the international price relationship and volatility transmissions between<br />stock index and stock index futures of Malaysia, Hong Kong and Japan. Vector Autoregression<br />(VAR) GJR-GARCH model was applied to the nine years daily price. Japanese<br />markets are the main information producer to the market price changes. International market<br />interdependence only affected the domestic volatility transmission of spot and futures<br />market in Hong Kong. Asymmetric effects exist in all markets and the volatility persistence in<br />each market is high. Finally, the overall conditional correlation estimates for spot and futures<br />markets are higher in the unrestricted model form compared to the restricted model<br />form.<br />Keywords: spot-futures, lead-lags, volatility, VAR GJR-GARCH, Asian financial market