Co-movement Between NIFTY Spot and Futures Indices: A Time–Frequency Analysis Using Wavelet

Q3 Economics, Econometrics and Finance

Studies in Microeconomics Pub Date : 2023-10-12 DOI:10.1177/23210222231194860

Rupinder Katoch, Shilpa Batra

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引用次数: 0

Abstract

Appreciation of the impact of spot and futures markets on each other and their respective function in price discovery is the central idea of this study’s microstructure design. The volatility spillover and co-movement between the NIFTY spot and futures indices during the period of 2011–2021 are investigated. Maximal overlap discrete wavelet transformation (MODWT)-based DCC GARCH and Diebold and Yilmaz (2012) models have been applied to understand the dynamic associations and spillovers between returns of NIFTY spot and futures indices. To uncover the time-varying vibrant communications among the markets at diverse scales, a wavelet coherence technique has been used. The study found that index prices have a strong and significant dynamic conditional correlation at all scales, and there is diffusion of news in the short as well as long terms. The study uses novel granular wavelet-based research models to decode time–frequency varying behavioural patterns of spot and futures stock indices of India. It highlights the relationships between variables of interest over a range of timescales and allows market participants to rapidly evaluate their investment horizons at varied frequency band scales when building portfolio choices. Therefore, the study offers added understanding to investors and risk managers. JEL Classifications: G11, G12, G13, G14

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NIFTY现货和期货指数的联合运动:小波的时频分析

本研究微观结构设计的核心思想是了解现货和期货市场对彼此的影响以及它们各自在价格发现中的作用。研究了2011-2021年期间NIFTY现货指数与期货指数的波动溢出和协同运动。基于最大重叠离散小波变换(MODWT)的DCC GARCH和Diebold and Yilmaz(2012)模型被用于理解NIFTY现货和期货指数收益之间的动态关联和溢出效应。为了揭示不同尺度市场之间时变的动态通信，使用了小波相干技术。研究发现，各指数价格在各尺度上都具有较强且显著的动态条件相关性，且在短期和长期都存在消息的扩散。该研究采用基于小波的新型颗粒研究模型，对印度现货和期货股指的时频变化行为模式进行解码。它突出了一系列时间尺度上感兴趣的变量之间的关系，并允许市场参与者在建立投资组合选择时快速评估其在不同频带尺度上的投资范围。因此，该研究为投资者和风险管理者提供了额外的理解。JEL分类:G11, G12, G13, G14

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来源期刊

Studies in Microeconomics Economics, Econometrics and Finance-Economics, Econometrics and Finance (all)

CiteScore

1.40

自引率

0.00%

发文量

期刊介绍： Studies in Microeconomics seeks high quality theoretical as well as applied (or empirical) research in all areas of microeconomics (broadly defined to include other avenues of decision science such as psychology, political science and organizational behavior). In particular, we encourage submissions in new areas of Microeconomics such as in the fields of Experimental economics and Behavioral Economics. All manuscripts will be subjected to a peer-review process. The intended audience of the journal are professional economists and young researchers with an interest and expertise in microeconomics and above. In addition to full-length articles MIC is interested in publishing and promoting shorter refereed articles (letters and notes) that are pertinent to the specialist in the field of Microeconomics (broadly defined). MIC will periodically publish special issues with themes of particular interest, including articles solicited from leading scholars as well as authoritative survey articles and meta-analysis on the themed topic. We will also publish book reviews related to microeconomics, and MIC encourages publishing articles from policy practitioners dealing with microeconomic issues that have policy relevance under the section Policy Analysis and Debate.