Relation between ISE 30 index and ISE 30 index futures markets: Evidence from recursive and rolling cointegration

Turkey is one of the most dynamic emerging markets in the world and its futures market has developed significantly since the introduction of futures contracts by Turkish Derivatives Exchange in 2005. Istanbul Stock Index 30 (ISE 30) futures was one of the first contracts introduced and its trading increased rapidly over time. This study specifically focuses on the evolution and stability of cointegration relationship between the futures and spot prices of ISE 30 index during the sample period from February 4, 2005 through October 19, 2012. We test whether changing market conditions have an impact on the long-run relationship between spot index and index futures markets by employing recursive and rolling cointegration techniques. The findings reveal that the cointegration relationship weakens significantly during the global financial crisis and eurozone debt crisis periods but holds mostly over the estimation period.