What role do futures markets play in Bitcoin pricing? Causality,cointegration and price discovery from a time-varying perspective?

Recent papers that have explored spot and futures markets for Bitcoin have concluded that price discovery takes place either in the spot, or the futures market. Here, we consider the robustness of previous price discovery conclusions by investigating causal relationships, cointegration and price discovery between spot and futures markets for Bitcoin, using appropriate daily data and time-varying mechanisms. We apply the time-varying Granger causality test of Shi, Phillips, and Hurn [2018]; time-varying cointegration tests of Park and Hahn [1999], and time-varying information share methodologies, concluding that futures prices Granger cause spot prices and that futures prices dominate the price discovery process.     

PREDICTIVE POWER OF THE TERM STRUCTURE IN AUSTRALIA IN THE LATE 1980'S: A NOTE

The Market Expectations Theory of the Term Structure of Interest Rates is tested using Wednesday yields on 13 week and 26 week treasury notes and 90 and 180 day bank accepted bills for the period 3 December 1986 to 13 March 1991 obtained from the Reserve Bank of Australia. In ordinary least squares regression based tests the Market Expectations Theory of the Term Structure of Interest Rates is accepted for bank accepted bills but rejected for treasury notes. Augmented Dickey Fuller unit root tests provide evidence of non-stationarity in the variables; a possibility often ignored in Australian studies. Although the unit root tests are generally consistent with the existence of one unit root, residual based cointegration tests between the forward rate and spot rate are not consistent with cointegration. This suggests that the prior expectations theory results may be a result of spurious regression. Perhaps a more complex model is required, coupled with tests which take account of non-stationary time series.     

Step Interventions and Market Integration: Tests in the U.S., U.K., and Australian Property Markets

Market integration implies the existence of some long-run equilibrium relationship between markets such that movements in one market are transmitted to movements in another. It is an interesting observation of much of the literature regarding a possible relationship between real estate and stock markets that there is relatively scant attention given to the possible existence of structural breaks and the impact that such breaks may have on tests for market integration. Other research has shown that failure to take into account structural breaks in various macroeconomic data series may have yielded misleading results on cointegration (in particular, unit root tests on individual series). In this article we examine the issue of whether the stock market and real estate markets are stationary or nonstationary in the presence of structural breaks. We adopt the techniques of Perron (1989), Zivot and Andrews (1992), and Perron and Vogelsang (1992). Each of these tests is based on different assumptions and therefore may yield differing results. In general, the results do not support cointegration of domestic property and equity markets or cointegration of markets internationally.     

Arbitrage, Risk Premium, and Cointegration Tests of the Efficiency of Futures Markets

This article provides a new perspective on the efficiency of futures markets in a cointegration framework. Under the conventional risk premium hypothesis, if futures and spot prices are non-stationary, they must be cointegrated if futures markets are efficient. Alternatively, the cost-of-carry model implies that there should be a cointegration relationship among spot prices, futures prices and interest rates assuming all the series contain a unit root. Market efficiency further implies specific parameter restrictions under these two models. Using data on the futures markets for gold, silver, palladium and platinum, this article first establishes that interest rates, spot and futures prices are unit root non-stationary. The evidence on cointegration is somewhat mixed: the gold futures market is consistent with the cost-of-carry model, and the silver futures market satisfies the risk premium hypothesis, but the evidence for the other two markets is inconclusive.     

股指期货合约存续期价格引导关系的时变性研究

针对股指期货非季月合约存续期较短这一特点,按一定的标准将股指期货非季月合约2个月的存续期划分为合约上市期、主力合约期、非主力合约期、合约交割期等阶段,采用单位根检验、协整检验、格兰杰因果检验、脉冲响应分析等方法,利用各阶段5分钟或1分钟高频交易数据对股指现货、股指期货主力合约、股指期货非主力合约的价格引导关系进行实证分析,得出的结论是股指期货非季月合约在其存续期内的价格引导能力具有明显的时变性特征,股指期货和现货市场的跨市场监管者和交易者需要根据股指期货合约价格引导关系的时变性来合理制定自身的监管策略和交易策略。     

我国铝期货与现货价格均衡关系实证研究

期货市场与现货市场是一对关联程度非常高的市场,本文以上海期货交易所铝期货和现货为例,利用协整检验、误差修正模型等方法,得到了我国铝期货市场与现货市场长期均衡关系和短期动态关联关系,表明我国铝期货市场已基本具备市场价格发现功能,并形成了价格自我约束机制。     

Price discovery and volatility spillovers in index futures markets: Some evidence from Mexico

This paper investigates the hypotheses that the recently established Mexican stock index futures market effectively serves the price discovery function, and that the introduction of futures trading has provoked volatility in the underlying spot market. We test both hypotheses simultaneously with daily data from Mexico in the context of a modified EGARCH model that also incorporates possible cointegration between the futures and spot markets. The evidence supports both hypotheses, suggesting that the futures market in Mexico is a useful price discovery vehicle, although futures trading has also been a source of instability for the spot market. Several managerial implications are derived and discussed.     

Testing for international equity market integration using regime switching cointegration techniques

Using MSCI total return index data, this paper analyses the degree of international equity market integration using modern cointegration techniques. The existence of a long run equilibrium across equity markets is important since it implies a violation of weak form market efficiency. Short run deviations away from equilibrium can be expected to reverse, thereby implying a degree of market predictability. This analysis adds to the existing literature by considering a regime switching cointegration relationship that allows for multiple structural breaks over time. The analysis provides scant evidence in favour of market integration with a single regime treatment. There is, however, significant evidence to support a two-regime Markov switching long-run equilibrium relationship that has evolved since the 1970s.     

Do the stock and CDS markets price credit risk equally in the long-run?

In this paper, we examine the existence and stability of the long-run equilibrium relation between the price of credit risk in the stock and CDS markets for a sample of non-financial iTraxx Europe companies during the 2004–2017 period. We show that standard cointegration tests with no breaks frequently fail to detect cointegration. Once we formally account for the breaks in the cointegrating vector, we are able to detect cointegration over the entire sample period for the vast majority of the companies considered. An application of these results to CDS-equity trading shows that the profitability of traditional trading strategies crucially depends on the presence of cointegration and on the stability of the cointegrating vector. Finally, we find that CDS illiquidity factors decrease the likelihood of the stock and CDS market cointegration.     

Integration Between the Baltic and International Stock Markets

Using cointegration tests, this paper analyzes the existence of long-run relationships among Baltic stock markets and major international stock markets, including the United States, Japan, Germany, the United Kingdom, and France. Bivariate and multivariate cointegration tests indicate a common trend linking Latvia to European markets. Evidence indicates that the German market dominates this long-run relationship. In general, short-term Granger causality indicates causality running from the European markets to the Baltic markets, as well as among the Baltic states, excepting Latvian and Lithuanian short-term effects on the Estonian market. Overall, the results suggest that international investors can obtain diversification benefits given a long-term investment horizon because of the low degree of integration between the Baltic and international capital markets.     

中国饲料工业期货的价格发现实证研究

本文借助向量自回归模型、协整检验、误差修正模型、方差分解、脉冲响应函数等方法,以中国唯一的饲料工业期货———大连商品交易所豆粕期货品种为例,研究了期货价格与现货价格之间的动态关系,定量刻画了期货市场在价格发现中的作用。研究结果显示:豆粕期货价格与现货价格存在相互引导关系,并且期货与现货价格之间存在长期均衡关系,对豆粕期货来说,期货市场在价格发现功能中起到主导作用。     

A study of cointegration and variance decomposition among national equity indices before and during the period of the Asian financial crisis

This study uses a cointegration and variance decomposition analysis to examine the linkages among the stock markets of 12 Asia–Pacific countries, before and during the period of the Asian financial crisis. Johansen (1988) multivariate cointegration and error-correction tests demonstrate evidence in support of the existence of cointegration relationships among the national stock indices during, but not before, the period of financial crises. In the recent crisis, the relationship within the South-East Asian countries seems to be stronger than that within the North-East Asian countries. The variance decomposition reveals that the ‘degree of exogeneity’ for all indices has been reduced, implying that no countries are ‘exogenous’ to the financial crisis. In addition, Granger’s causality test suggests that the US market still ‘causes’ some Asian countries during the period of crisis, reflecting the US market’s persisting dominant role.     

Evidence on the existence of speculative bubbles in farmland prices

We conduct tests for the contribution of speculative bubbles to farmland prices. These tests are carried out under the hypothesis that farmland investors rationally form expectations. The outcome of tests reported here allows us to infer whether farmland prices are determined by market fundamentals-discounted returns from the highest economic land use-or whether rumors about farmland price movements are self-fulfilling. The tests are stationarity and cointegration tests relating farmland prices to rents. The tests are carried out using data from three farm production regions-the Corn Belt, the Northern Plains, and the Lake States. In each region, we find little evidence to reject the hypothesis that market fundamentals determine farmland prices.     

International Stock Market Efficiency and Integration: A Study of Eighteen Nations

This study examines the relationships among stock prices in eighteen national stock markets by using unit root and cointegration tests for the period 1961--92. All the markets were analyzed individually and collectively in regions to test for market efficiency. The results from unit root tests suggest that the world equity markets are weak-form efficient. The cointegration test results show that there are only a small number of significant cointegrating vectors over the last three decades. However, the number of significant cointegrating vectors increases after the October 1987 stock market crash, a result that is consistent with the contagion effect.     

DO AUSTRALIAN SPOT FOREIGN EXCHANGE RATES STILL SHOW EVIDENCE OF COINTEGRATION?

Informational efficiency in the Australian spot foreign exchange market has been examined by other authors, but most of these studies examine a time span that covers the immediate post-float period. This article analyses a period that begins nearly three and a half years after the floating of the Australian dollar and applies Johansen's test to detect any cointegrating relationship in a system of five foreign currencies. It finds no evidence of cointegration and, therefore, supports the proposition of informational efficiency in the foreign exchange market. This result is in contrast to most other such studies of the Australian market and may be partly due to the increasing maturity and sophistication of the market participants in dealing with a floating currency.     

Long-Run Diversification Potential in Emerging Stock Markets

In this paper we use cointegration tests to examine the long-run diversification potential of 13 emerging capital markets. The Johansen [18] and Johansen and Juselius [19] cointegration procedures are applied to the U.S. and 13 emerging capital markets in three geographical regions of the world. None of the three regions examined possesses cointegrated markets. The lack of cointegration indicates that the correlation between returns from each market is independent of the investment horizon Return correlations using weekly data correspond to the long-run investment horizon correlation. Correlations among the returns from these countries are low on average and occasionally negative. The apparent independence of markets within these three emerging regions suggests that diversification across these countries is effective.     

Portfolio diversification effects of trading blocs: The case of NAFTA

This study investigates the evolving nature of North American Free Trade Agreement (NAFTA) stock market interdependencies and their association with diversification gains from the perspective of US investors. The issues are addressed for both short- and long-run interdependencies through correlation of stock market returns and cointegration of stock market prices. The basic findings include: (1) the existence of a long-term relationship (a cointegration relation) which is time-varying and statistically unstable and (2) diversification gains with cointegration not consistently lower than without cointegration. Thus, per-unit-of-risk diversification gains to US investors from NAFTA stock markets are determined by return volatilities, return correlations and domestic market performance. Based on increased return volatilities and return correlations and the very small per-unit-of-risk diversification gains even when the US stock market performs poorly, US investors’ diversification gains have diminished since the implementation of NAFTA.     

IS THE TOKYO SPOT FOREIGN EXCHANGE MARKET CONSISTENT WITH THE EFFICIENT MARKET HYPOTHESIS?

Recent Studies in the area of foreign exchange market efficiency have employed time series analysis to test for the absence of long-run equilibrium or cointegration relationships among the exchange rates for the major currencies. Cointegration directly violates the weak form of the Efficient Market Hypothesis in a speculative efficient market (Granger, 1986). In this study, we address the efficiency of the Tokyo spot foreign exchange market while updating the test procedures developed by Phillips and Ouliaris (1990), Johansen and Juselius (1990) and Johansen (1991). Cointegration is found to be absent, showing that the Tokyo spot market is consistent with the efficient market hypothesis.     

中国股指期货“助涨助跌效应”实证研究

利用E-G两部法协整检验、向量误差修正模型、VAR模型、Granger因果性检验及脉冲响应和方差分解全面剖析了股指期货与现货市场之间的联动性。实证研究结果表明股指期货和股票指数之间存在长期的均衡关系,股票指数短期的过度偏离会导致长期非均衡误差的弱势修正,当市场受到确定性信息冲击时,股票期货市场对股票现货市场具有助涨助跌作用;当市场受到不确定信息冲击时,股票现货市场对股票期货市场具有助涨助跌作用。     

Price discovery on the S&P 500 index markets: An analysis of spot index,index futures,and SPDRs

This paper investigates the price discovery function in three S&P 500 index markets: the spot index, index futures, and S&P Depositary Receipts markets. Four hypotheses regarding market structure and security design are proposed to differentiate the price discovery function performed by the three index instruments. Using matched synchronous intraday trading data, Johansen's maximum likelihood estimator is employed to disclose the cointegration relationships among the three markets. Results indicate that the three price series are a cointegrated system with one long-run stochastic trend. Estimated coefficients of the vector error correction model suggest that price adjustment takes place in the spot index market and for SPDRs, but not in the futures market. When the common stochastic trend is decomposed, it is found that the futures market serves the dominant price discovery function. The leverage hypothesis and the uptick rule hypothesis explain its superior price discovery function.