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What drives the off-shore futures market? Evidence from India and China

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  • Kumar, S.S.S.
  • Sampath, Aravind

Abstract

We investigate price determinants of offshore listed derivatives of Chinese and Indian indices when the underlying is closed for trading. Using intraday data from Singapore Exchange listed index futures, we split a trading day into pre-market hours, market hours and post-market hours. In pre-market hours, USD exchange rate explains SGX futures. During market hours, the cost of carry model drives SGX futures. Post the market hours, we find that the US market explains SGX futures prices. Our findings are consistent for both India and China, suggesting that price formation in offshore listed derivatives is not speculative, rather driven by fundamentals.

Suggested Citation

  • Kumar, S.S.S. & Sampath, Aravind, 2019. "What drives the off-shore futures market? Evidence from India and China," Finance Research Letters, Elsevier, vol. 30(C), pages 394-402.
    • Handle: RePEc:eee:finlet:v:30:y:2019:i:c:p:394-402
    DOI: 10.1016/j.frl.2018.11.001
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    More about this item

    Keywords

    Offshore derivatives; Non-trading hours; SGX futures; Spot indices;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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