Lead-Lag Relationship between ISE 30 Spot and Futures Markets


Second International Balkan Annual Conference, Albania, 1 - 04 October 2012, pp.446-464

  • Publication Type: Conference Paper / Full Text
  • Country: Albania
  • Page Numbers: pp.446-464


The lead-lag relationship between spot and futures markets indicates which market leads to the other. Determining the direction of this casual relationship between spot and futures market carries important information for traders since leading of one market to another enables an arbitrage opportunity. This paper investigates the lead-lag relationship between spot and futures markets in Turkey. The most liquid stock index futures contracts traded in Turkish Derivatives Exchange (TurkDEX) are Istanbul Stock Exchange (ISE) 30 index futures contracts, because of this reason, the lead-lag relationship between ISE 30 index and ISE 30 index futures is examined by using daily observations for sample period February 2005-March 2011. The results indicate that spot market plays a price discovery role for futures market, implying that spot prices contain useful information about future prices for ISE 30 index. These findings are helpful to financial managers and traders dealing with Turkish stock index futures.