Using min observations from June —, it is found that lagged changes in the futures price can help to predict changes in the spot price.
The best forecasting model is of the error correction type, allowing for the theoretical difference between spot and futures prices according to the cost of carry relationship.
This predictive ability is in turn utilised to derive a trading strategy which is tested under real-world conditions to search for systematic profitable trading opportunities. It is revealed that although the model forecasts produce significantly higher returns than a passive benchmark, the model was unable to outperform the benchmark after allowing for transaction costs. Citations Citations 94 References References By construction , a cap-weighted portfolio has the lowest turnover as weights and market capitalisations change simultaneously through time.
Following Brooks et al. New evidence on alpha. Feb Int Rev Financ Anal. There is a large body of work dedicated to investigating the long-run relationship between spot index and index futures prices i.
It is relevant to focus on the Turkish index futures market developments during the recent crises global financial crisis and eurozone debt crisis since market turmoil in the financial markets might affect the underlying data generating process. Evidence from recursive and rolling cointegration. Yein as a measure of investor sentiment in Malaysia. The third variable for sentiment proxy is stock futures index. Thus, trading in futures market represents an investors' opinion about future cash market conditions.
First, sentiment and arbitrage trading cause these markets to be correlated. Second, the professional trader's conventional wisdom suggests that movements in the futures market should reflect the expected future movements in the cash market. Based on these just Structural change and lead-lag relationship between the Nikkei spot index and futures price: A genetic programming approach.
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