On contango, backwardation, and seasonality in index futures
The authors investigate contango and backwardation formations and seasonality traits in Malaysia over 22 years spanning 1995 to 2017. Employing graphical observations and statistical tests, contango and backwardation traits appear through market expectations, seasonality, cost of carry model predict...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English English |
| Published: |
Inst. Investor Inc.
2019
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/80163/ http://irep.iium.edu.my/80163/2/80163_On%20Contango%2C%20Backwardation%2C%20and%20Seasonality_article%20for%20MYRA.pdf http://irep.iium.edu.my/80163/1/80163_On%20Contango%2C%20Backwardation%2C%20and%20Seasonality_wos.pdf |
| _version_ | 1848788911125430272 |
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| author | Abd Wahab, Mohd Asraf Mohamad, Azhar Sifat, Imtiaz |
| author_facet | Abd Wahab, Mohd Asraf Mohamad, Azhar Sifat, Imtiaz |
| author_sort | Abd Wahab, Mohd Asraf |
| building | IIUM Repository |
| collection | Online Access |
| description | The authors investigate contango and backwardation formations and seasonality traits in Malaysia over 22 years spanning 1995 to 2017. Employing graphical observations and statistical tests, contango and backwardation traits appear through market expectations, seasonality, cost of carry model predictions, and index volatility. Unit root, cointegration, and Granger causality tests are employed to assess the existence of long-term relationships between KLCI (cash/spot index) and FKLI (stock index futures) contracts and the direction of the causality relationship. The results are suggestive of cointegration between the futures price index and the spot index in Malaysia. Moreover, a long-run relationship exists between the two variables—a result of backwardation’s predictive ability to find cash market bottoms. Malaysian markets show backwardation in April to June and August, while December is consistently in contango and exhibits moderately high success in the use of a cost-of-carry model in predicting contango and backwardation. |
| first_indexed | 2025-11-14T17:48:20Z |
| format | Article |
| id | iium-80163 |
| institution | International Islamic University Malaysia |
| institution_category | Local University |
| language | English English |
| last_indexed | 2025-11-14T17:48:20Z |
| publishDate | 2019 |
| publisher | Inst. Investor Inc. |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | iium-801632020-08-25T07:36:23Z http://irep.iium.edu.my/80163/ On contango, backwardation, and seasonality in index futures Abd Wahab, Mohd Asraf Mohamad, Azhar Sifat, Imtiaz HG Finance HG4001 Financial management. Business finance. Corporation finance. The authors investigate contango and backwardation formations and seasonality traits in Malaysia over 22 years spanning 1995 to 2017. Employing graphical observations and statistical tests, contango and backwardation traits appear through market expectations, seasonality, cost of carry model predictions, and index volatility. Unit root, cointegration, and Granger causality tests are employed to assess the existence of long-term relationships between KLCI (cash/spot index) and FKLI (stock index futures) contracts and the direction of the causality relationship. The results are suggestive of cointegration between the futures price index and the spot index in Malaysia. Moreover, a long-run relationship exists between the two variables—a result of backwardation’s predictive ability to find cash market bottoms. Malaysian markets show backwardation in April to June and August, while December is consistently in contango and exhibits moderately high success in the use of a cost-of-carry model in predicting contango and backwardation. Inst. Investor Inc. 2019 Article PeerReviewed application/pdf en http://irep.iium.edu.my/80163/2/80163_On%20Contango%2C%20Backwardation%2C%20and%20Seasonality_article%20for%20MYRA.pdf application/pdf en http://irep.iium.edu.my/80163/1/80163_On%20Contango%2C%20Backwardation%2C%20and%20Seasonality_wos.pdf Abd Wahab, Mohd Asraf and Mohamad, Azhar and Sifat, Imtiaz (2019) On contango, backwardation, and seasonality in index futures. The Journal of Private Equity, 22 (2). pp. 69-82. ISSN 1096-5572 E-ISSN 2168-8508 https://jpe.pm-research.com/content/22/2/69 10.3905/jpe.2019.1.076 |
| spellingShingle | HG Finance HG4001 Financial management. Business finance. Corporation finance. Abd Wahab, Mohd Asraf Mohamad, Azhar Sifat, Imtiaz On contango, backwardation, and seasonality in index futures |
| title | On contango, backwardation, and seasonality in index futures |
| title_full | On contango, backwardation, and seasonality in index futures |
| title_fullStr | On contango, backwardation, and seasonality in index futures |
| title_full_unstemmed | On contango, backwardation, and seasonality in index futures |
| title_short | On contango, backwardation, and seasonality in index futures |
| title_sort | on contango, backwardation, and seasonality in index futures |
| topic | HG Finance HG4001 Financial management. Business finance. Corporation finance. |
| url | http://irep.iium.edu.my/80163/ http://irep.iium.edu.my/80163/ http://irep.iium.edu.my/80163/ http://irep.iium.edu.my/80163/2/80163_On%20Contango%2C%20Backwardation%2C%20and%20Seasonality_article%20for%20MYRA.pdf http://irep.iium.edu.my/80163/1/80163_On%20Contango%2C%20Backwardation%2C%20and%20Seasonality_wos.pdf |