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Restrictions on Short‐Selling and Spot‐Futures Dynamics
Author(s) -
Fung Joseph K. W.,
Jiang Li
Publication year - 1999
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00254
Subject(s) - futures contract , spot contract , index (typography) , spot market , economics , futures market , affect (linguistics) , forward market , lag , deregulation , econometrics , financial economics , macroeconomics , computer science , electricity , computer network , linguistics , philosophy , world wide web , electrical engineering , engineering
Recent lifting of short‐sales constraints in Hong Kong provides an important opportunity to examine whether such restrictions affect the dynamic relationship between index futures and its underlying spot. The results show that the two prices have become more closely integrated without the restrictions. Adjustments to long‐run equilibrium are accomplished more through index futures; however, the spot index has played an increasingly more important role in the lead‐lag relationship after the deregulation. Market conditions, spot trading volumes, relative futures trading volumes and institutional participation also affect the dynamic relationship.