Lead–Lag Relationship Between Returns and Implied Moments: Evidence from KOSPI 200 Intraday Options Data

Sol Kim () and Geul Lee
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Sol Kim: College of Business, Hankuk University of Foreign Studies, 107, Imun-ro, Dongdaemun-gu, Seoul, 02450, Korea
Geul Lee: Finance Research Institute, NongHyup Financial Group Inc., 16 Saemunan-ro, Jung-gu, Seoul, Korea

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2017, vol. 20, issue 03, 1-20

Abstract: This study investigates whether a lead–lag relationship exists between the returns and the moments of the implied risk-neutral density (RND) in Korea Composite Stock Price Index (KOSPI) 200 spot, futures, and options markets. The empirical analysis suggests that although there is a bidirectional lead–lag relationship between the returns and the implied moments, the skewness and kurtosis of the implied RND Granger-cause the spot and futures returns more strongly than the returns do. In contrast, the implied volatility is shown to Granger-cause the returns less strongly than the returns do. In addition, this study shows that the lead–lag relationship strengthens when the spot market is exceptionally bullish or bearish.

Keywords: Lead–lag relationship; implied risk-neutral density; skewness; kurtosis (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:wsi:rpbfmp:v:20:y:2017:i:03:n:s0219091517500175

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DOI: 10.1142/S0219091517500175

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