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Information Spillovers In The Spot And Etf Indices In Taiwan

Author

Listed:
  • Chien-Cheng Wang
  • Yung-Shi Liau
  • Jack J.W. Yang

Abstract

This paper empirically explores the impact of the spot index on the exchange trade fund (ETF) indices in Taiwan, with the vector autoregressive (VAR) model revealing positive relationships between the six time-series variables. Our results indicate that the ETF 52 index has the greatest volatility as well as the most negative returns, whilst also suggesting the existence of at least five cointegrating vectors among the variables; thus, through the concept of cointegration, we demonstrate that vectors will not arbitrarily wander far from each other in long-run relationships. We also examine Granger (1980) causality in the relationships between the variables and find that the guiding relationship exists within the spot index, with stronger indications of the spot index leading the ETF indices. Among the six time-series variables, depending on the decomposition of the forecast residual variance, the spot index is the least affected by external forces. Furthermore, the spot index is affected mainly by its own shocks, and less so by those of the other time-series variables. Although the spot index variance decomposition can identify all but its own excess shocks, none of the indices can consistently trace out the effects of one-unit impulses.

Suggested Citation

  • Chien-Cheng Wang & Yung-Shi Liau & Jack J.W. Yang, 2009. "Information Spillovers In The Spot And Etf Indices In Taiwan," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 3(1), pages 117-131.
    • Handle: RePEc:ibf:gjbres:v:3:y:2009:i:1:p:117-131
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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