Contemporaneous Causal Orderings of CSI300 and Futures Prices through Directed Acyclic Graphs

Xiaojie Xu ()
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Xiaojie Xu: North Carolina State University

Economics Bulletin, 2019, vol. 39, issue 3, 2052-2077

Abstract: This paper examines contemporaneous causality among daily price series of the Chinese Stock Index 300 (CSI300), nearby futures, and first distant futures for April 2010 ~ November 2014 through vector error correction modeling and directed acyclic graphs. As non-Gaussian data are prominent in financial time series, the recently developed Linear Non-Gaussian Acyclic Model (LiNGAM) algorithm is utilized to facilitate analysis. It refines results derived from the PC algorithm, which does not lead to the unique identification of a directed acyclic graph. The price series studied are tied together through cointegration and the nearby futures adjusts towards long-run relationships. Contemporaneous price information is determined to be discovered in the nearby futures. The results suggest that a shock to the nearby futures could have long-lasting effects on prices across the three series under consideration. Policy makers should pay close attention to the nearby futures for financial stability.

Keywords: CSI300; Futures; Contemporaneous Causality; Graph Theory; LiNGAM (search for similar items in EconPapers)
JEL-codes: C5 G1 (search for similar items in EconPapers)
Date: 2019-09-07
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Citations: View citations in EconPapers (3)

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