An Empirical Investigation of the Lead-Lag Relations of Returns and Volatilities among the KOSPI200 Spot, Futures and Options Markets and their Explanations

Jangkoo Kang, Chang Joo Lee and Soonhee Lee
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Jangkoo Kang: Jangkoo Kang (corresponding author) is at the Graduate School of Management, Korea Advanced Institute of Science and Technology, 207-43 Cheongryangri-dong, Dongdaemun-Gu, Seoul-130012. E-mail: jkkang@kgsm.kaist.ac.kr
Chang Joo Lee: Chang Joo Lee is at the Graduate School of Management, University of Illinois at Urbana-Champaign, Champaign, IL61820-6978 USA.
Soonhee Lee: Soonhee Lee is at the Korea Bond Pricing & Rating Co., Kwanghwamoon Building (9th floor) Chongro-Gu, Seoul-110730.

Journal of Emerging Market Finance, 2006, vol. 5, issue 3, 235-261

Abstract: This article empirically examines the lead-lag relations among the KOSPI200 spot market, the KOSPI200 futures market, and the KOSPI200 options market, and provides some explanations for the observed lead-lag relations. In general, the KOSPI200 futures and options markets lead the KOSPI200 spot market by up to 10 minutes in terms of returns and by 5 minutes in terms of volatilities, even after purging the infrequent trading effect as well as the bid-ask spread effect. The KOSPI200 options market leads and lags the KOSPI200 futures market by 5 minutes only in terms of returns. The observed lead-lag relations seem to be caused by the difference in transaction costs of the three markets.

Keywords: JEL Classification: G13; JEL Classification: G14; Lead-Lag Relations; Information Transmission; Market Efficiency (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:5:y:2006:i:3:p:235-261

DOI: 10.1177/097265270600500303

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