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The lead–lag relationship between the spot and futures markets in China

Author

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  • Donghua Wang
  • Jingqing Tu
  • Xiaohui Chang
  • Saiping Li

Abstract

Based on daily and one-minute high-frequency returns, this paper examines the lead–lag dependence between the CSI 300 index spot and futures markets from 2010 to 2014. A nonparametric and non-linear method based on the thermal optimal path method is adopted. Empirical results of the daily data indicate that the lead–lag relationship between the two markets is within one day but this relationship is volatile since neither of the two possible situations (the futures leads or lags behind the spot market) takes a dominant place. Our results using the high-frequency data demonstrate that there is a price discovery in the Chinese futures market: the intraday one-minute futures return leads the cash return by 0–5 min regardless of the price trend of the market.

Suggested Citation

  • Donghua Wang & Jingqing Tu & Xiaohui Chang & Saiping Li, 2017. "The lead–lag relationship between the spot and futures markets in China," Quantitative Finance, Taylor & Francis Journals, vol. 17(9), pages 1447-1456, September.
    • Handle: RePEc:taf:quantf:v:17:y:2017:i:9:p:1447-1456
    DOI: 10.1080/14697688.2016.1264616
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    Citations

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    Cited by:

    1. Yang, Yan-Hong & Shao, Ying-Hui, 2020. "Time-dependent lead-lag relationships between the VIX and VIX futures markets," The North American Journal of Economics and Finance, Elsevier, vol. 53(C).
    2. Shao, Ying-Hui & Yang, Yan-Hong & Shao, Hao-Lin & Stanley, H. Eugene, 2019. "Time-varying lead–lag structure between the crude oil spot and futures markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 523(C), pages 723-733.
    3. Li, Jiaqi & Ahn, Hee-Joon, 2024. "Sensitivity of Chinese stock markets to individual investor sentiment: An analysis of Sina Weibo mood related to COVID-19," Journal of Behavioral and Experimental Finance, Elsevier, vol. 41(C).
    4. Yuan, Xianghui & Jin, Liwei & Lian, Feng, 2021. "The lead–lag relationship between Chinese mainland and Hong Kong stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 574(C).
    5. Liu, Shengnan & Yang, Linshan & Gu, Rongbao, 2023. "Can the introduction of stock index futures stabilize the volatility of the stock market? Evidence from the Chinese stock market," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 44-58.
    6. Chen, Zhang-HangJian & Ren, Fei & Yang, Ming-Yuan & Lu, Feng-Zhi & Li, Sai-Ping, 2023. "Dynamic lead–lag relationship between Chinese carbon emission trading and stock markets under exogenous shocks," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 295-305.
    7. Jiang, Tao & Bao, Si & Li, Long, 2019. "The linear and nonlinear lead–lag relationship among three SSE 50 Index markets: The index futures, 50ETF spot and options markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 525(C), pages 878-893.

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