Journal
| Title | Price Discovery in NSE Spot and Futures Markets of India: Evidence from S&P CNX Nifty Index and Selected Pharmaceutical Sector Stocks | |
| Author's Name | P. Srinivasan .nad P. Ibrahim | |
| ISSN | 0974-7281 | |
| Page(s) | 1-22 | |
| Volume No. | 1 | |
| Issue Month | July 2009 | |
| Keywords | Cointegration, Lead-Lag Relationship, Vector Error Correction Model. | |
| Abstract | Johansen's cointegration technique followed by the vector error correction model (VECM) was employed to examine the lead-lag relationship between NSE spot and futures markets of S&P nifty index and its underlying twelve pharmaceutical sector stocks of India. The empirical analysis for the nifty and twelve individual stocks were conducted for the daily data series from 12th June, 2000 to 15thSeptember, 2008 and 27th May, 2005 to 12th September, 2008 respectively. The present analysis confirms a presence of bi-directional relationship between the nifty spot and nifty futures index prices. Hence, it can be concluded that both the spot and future markets plays the leading role through price discovery process in India and said to be informationally efficient and reacts more quickly to each other. Besides, the empirical results of individual pharmaceutical sector stocks reveal the mixed findings. Hence, the present study suggests that depending on the relative proportions of informed to uninformed (noise) traders migrating from the spot market to the futures market, the lead-lag relationship between futures and spot market of selected pharmaceutical sector stocks may differ. |
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