The lead lag relationship between spot and futures markets in the energy sector: Empirical evidence from indian markets

Abstract

The study aims at finding the intraday Lead-Lag relationship between Spot and Futures Market for Energy Sectors Stocks on which Single Stock Futures (SSFs) is available, by applying 1-min Price Returns for the period ranging from April 1, 2017 to March 31, 2019. The study explores price-discovery between stock futures and their underlying stocks by applying vector error correction model, Hasbrouck (1995) Information Shares, and Common Factor Component Weights of Gonzalo and Granger (1995). The findings indicate that trades in the Futures Market contribute more to Price-Discovery than Spot Market.