The lead-lag relationship between the underlying stock marketand Index futures market: Empirical evidence from Vietnam

Abstract

The objective of this study is to determine the lead-lag relationship between the underlying stock market and the Index futures market in Vietnam. The data used in this study include the daily VN30-index and closing price of one-month futures contract for the period from August 10, 2017 to July 12, 2022. Results derived from the VAR (vector autoregressive)model reveal that returns of the underlying market have positive relationships with returns of the Index future market at all 10 lags. However, in the opposite direction, the Index future market does not have any effects on the underlying market. In addition, results of the Granger causality test confirm there is the uni-directional causality, from the underlying stock market to the Index futures market.