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Correlation between the Stock and Futures Markets by Timescale
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 Title & Authors
Correlation between the Stock and Futures Markets by Timescale
Lee, Chang Min; Lee, Hahn Shik;
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 Abstract
This paper examines the relationship between the stock and futures markets in terms of lead-lag relationship, correlation and the hedge ratio using wavelet analysis. The basic finding is that the relationship between the two markets significantly depends on the time-scale. First, there is a feedback relationship between the stock and futures markets in the long-run scale; however, weaker evidence is observed in shorter-run scales. Second, wavelet correlation between the two markets increases for a longer time scale. Third, the hedge ratio and the effectiveness of hedging strategies increase as the investment horizon gets longer. The results in this paper indicate that the stock and futures series are perfectly correlated in the long run and are tied together over long horizons.
 Keywords
Correlation;causality;hedge ratio;wavelet;timescale;
 Language
Korean
 Cited by
1.
소파동 분석을 통해 살펴본 유가가 GDP 및 물가에 미치는 영향,이창민;홍지민;

Journal of the Korean Data Analysis Society, 2015. vol.17. 4B, pp.2025-2034
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