Unified Test of Causality and Cost of Carry Model : Pricing of the Kuala Lumpur Composite Index Futures Contract
This paper examines the causal relationship and the validity of the cost of carry model for pricing the FBMKLCI futures contracts. The test is carried out over the time period of 3/1/2006 – 30/6/2011 where it is split into two sub periods based on the changes in the index constituents and refresh ti...
| Main Author: | |
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| Format: | Dissertation (University of Nottingham only) |
| Language: | English |
| Published: |
2011
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| Online Access: | https://eprints.nottingham.ac.uk/25496/ |
| _version_ | 1848792992691781632 |
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| author | Lau, Kenny Yee Sheng |
| author_facet | Lau, Kenny Yee Sheng |
| author_sort | Lau, Kenny Yee Sheng |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | This paper examines the causal relationship and the validity of the cost of carry model for pricing the FBMKLCI futures contracts. The test is carried out over the time period of 3/1/2006 – 30/6/2011 where it is split into two sub periods based on the changes in the index constituents and refresh times. The empirical work is carried out using the economic modelling based on the VECM framework for spot and futures prices. Our findings show that there is some (but weak) evidence against the cost of carry relationship between spot and futures prices in both our sub periods. This research also found bidirectional causality between spot and futures prices with a stronger causality from futures to spot. Strong mean reversion was found in the returns of both spot and futures returns suggesting overreaction in spot and futures price to new information. |
| first_indexed | 2025-11-14T18:53:13Z |
| format | Dissertation (University of Nottingham only) |
| id | nottingham-25496 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-14T18:53:13Z |
| publishDate | 2011 |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-254962018-02-16T19:38:18Z https://eprints.nottingham.ac.uk/25496/ Unified Test of Causality and Cost of Carry Model : Pricing of the Kuala Lumpur Composite Index Futures Contract Lau, Kenny Yee Sheng This paper examines the causal relationship and the validity of the cost of carry model for pricing the FBMKLCI futures contracts. The test is carried out over the time period of 3/1/2006 – 30/6/2011 where it is split into two sub periods based on the changes in the index constituents and refresh times. The empirical work is carried out using the economic modelling based on the VECM framework for spot and futures prices. Our findings show that there is some (but weak) evidence against the cost of carry relationship between spot and futures prices in both our sub periods. This research also found bidirectional causality between spot and futures prices with a stronger causality from futures to spot. Strong mean reversion was found in the returns of both spot and futures returns suggesting overreaction in spot and futures price to new information. 2011 Dissertation (University of Nottingham only) NonPeerReviewed application/pdf en https://eprints.nottingham.ac.uk/25496/1/LauKennyYeeSheng.pdf Lau, Kenny Yee Sheng (2011) Unified Test of Causality and Cost of Carry Model : Pricing of the Kuala Lumpur Composite Index Futures Contract. [Dissertation (University of Nottingham only)] (Unpublished) |
| spellingShingle | Lau, Kenny Yee Sheng Unified Test of Causality and Cost of Carry Model : Pricing of the Kuala Lumpur Composite Index Futures Contract |
| title | Unified Test of Causality and Cost of Carry Model : Pricing of the Kuala Lumpur Composite Index Futures Contract |
| title_full | Unified Test of Causality and Cost of Carry Model : Pricing of the Kuala Lumpur Composite Index Futures Contract |
| title_fullStr | Unified Test of Causality and Cost of Carry Model : Pricing of the Kuala Lumpur Composite Index Futures Contract |
| title_full_unstemmed | Unified Test of Causality and Cost of Carry Model : Pricing of the Kuala Lumpur Composite Index Futures Contract |
| title_short | Unified Test of Causality and Cost of Carry Model : Pricing of the Kuala Lumpur Composite Index Futures Contract |
| title_sort | unified test of causality and cost of carry model : pricing of the kuala lumpur composite index futures contract |
| url | https://eprints.nottingham.ac.uk/25496/ |