رابطه بلند مدت بین نقطه و بازارهای آتی تحت تغییرات نظام چندگانه: شواهدی از مشتقات ارز ترکیه

The paper examines the long-run relationships between the spot and future prices of Istanbul Stock Exchange 30 index (ISE-30) and foreign currencies including the Turkish Lira-US Dollar (TL/USD) and Turkish Lira-Euro (TL/EUR). We analyze the weekly data covering the period from February 9, 2005 to October 17, 2012. Considering structural breaks is important for our analysis since our period consists of recent financial crisis. Therefore, we employ the unit root tests developed by Carrion-i-Silvestre et al. (2009) and the Maki’s (2012) cointegration test allowing for an unknown number of breaks. We find that spot and the futures prices are cointegrated in the long-run after we consider structural breaks in our data. Our results indicate that the markets are efficient.

Although it has begun its operations only a few years ago, the Turkish Derivatives Exchange (TDEX) has become one of the fastest growing emerging futures market in the world.2 There are a variety of futures contracts in TDEX; i.e., equity index futures on ISE 30 and ISE 100 indices, currency futures on US Dollars and Euro, commodity futures on gold, cotton, wheat and live cattle and energy futures on base-load electricity. However, among them index contracts have the highest trading ahead of the currency futures in the second place. While index contracts from 88.38% and 97.20% of the total number of contracts traded and the total trading value for 2010, currency contracts follow them with 11.38% and 2.58% respectively. Investors make use of stock index futures to speculate on the performance of the entire market; if they expect an improvement in the economy, they will buy the index; otherwise they will short the index. They can also use currency futures to speculate on the value of currencies thereby taking long position in futures contract on that currency or vice versa. Index futures contracts are used in speculative way in the TDEX as frequently as in the most of index futures in the world, yet investors may also use them to hedge their spot equity portfolio against the price declines by going short at the futures market. Here, it is important for the investors to determine their optimum hedge ratio by considering the correlation between the prices of futures and spot positions.3 Similarly, traders, particularly importers and exporters, can use currency futures to hedge their foreign exchange positions by taking a long or a short position on currency futures. In addition, arbitrage is another aim of involving into the futures contracts. Arbitrageurs make transactions in both spot and futures market for the same asset and make profit when the price of the futures contract gets out of line with its spot price. These can be summed up as the main reasons motivating the researchers to investigate the relationship between the spot and future prices. According to the efficient market hypothesis, generally in the financial markets all relevant information is always efficiently processed and reflected simultaneously into both the spot and futures prices, hence arbitrage opportunities would always be limited. Brooks, Garrett, and Hinich (1999) argue that in a perfect market with non-stochastic interest rates and dividend yields, they are perfectly contemporaneously correlated and no lead–lag relationship would exist. The relationship between the spot and futures prices can also be explained by the price discovery hypothesis. Accordingly, if the markets are efficient and frictionless, then price discovery would be instantaneous and contemporaneous. Otherwise, price discovery would occur in one market and the other market would follow it. The normal and theoretically correct relationship between the spot price and its futures can be explained by the “cost of carry model” or the “spot–futures parity theorem”. The parity for the index futures can be stated as: equation(1) F0=S0(1+rf-d)TF0=S0(1+rf-d)T Turn MathJax on where F0 is the future price at time 0, S0 is the spot price at time 0, rf is the risk-free rate, and d is the dividend yield on the stock portfolio. It is called the “cost of carry relationship” because it defines a setting in which futures price must exceed the spot price by the net cost of carrying the asset until maturity date T ( Bodie, Kane, & Marcus, 2009: 775). However, in practice one should take into account some market imperfections such as asymmetric information, transaction costs, short-selling, margins, and liquidity, which might cause deviations from that parity. Those deviations might induce lead–lag relationships between the spot and futures markets and enhance the arbitrage chances for investors trading in both of these markets. There are a considerable number of studies depicting that futures market leads the spot market due to deviations such as high liquidity, low transaction costs, easy availability of short positions and low margins of the futures market (e.g. see, Chan, 1992, Kawaller et al., 1987 and Stoll and Whaley, 1990 and Abhyankar, 1998 and Pizzi et al., 1998). On the other hand, Brooks, Rew, and Ritson (2001) argue that the lead–lag relationship between spot and futures markets do not last for more than half an hour and argue that the parity holds in the long-run. In the same line, Maslyuk and Smyth (2009) argue that the theoretical relationship between spot and futures prices is a long-run, rather than short-run because in the short-run, there might be deviations between spot and future prices however in the long-run they are driven by the same macroeconomic indicators. Following to these studies, in this paper our aim is to examine the long-run relationship between the spot and futures prices of both the ISE 30 and foreign currencies in order to find out whether these markets are efficient. This paper provides three contributions to the existing literature: First, many empirical studies examining the long-run relationship between the spot and futures prices have adopted the vector auto regression model (VAR) or cointegration methods proposed by Engle and Granger, 1987, Johansen, 1988, Ghosh, 1993, Wahab and Lashgari, 1993, Brenner and Kroner, 1995, Pizzi et al., 1998 and Brooks et al., 2001) but, none of these studies have allowed for a structural break in the cointegrating vector. Therefore, different from the previous studies we employ the unit root tests developed by Carrion-i-Silvestre, Kim, and Perron (2009) and the Maki’s (2012) cointegration test allowing for an unknown number of breaks. Considering structural breaks is important for our analysis since our period consists of the effects of the recent financial crisis. Second, many of the previous studies examine the developed futures markets but this paper analyze TDEX which is an emerging market in its early stages but has become one of the top 30 futures exchanges in the world after just eight years. Third, our data consist of the index (TDEX-30) and currency futures (TDEX-USD and TDEX-EUR) which are mostly traded contracts representing almost the whole market for the period from February 9, 2005 to October 17, 2012 covering the whole life of TDEX. Existence of the long-run relationship indicates that the markets are efficient in the long run and eliminate the diversification benefits in portfolios that consist of the stock index and its futures as well as the currencies and their futures for a long period. Our results are important for the investors and portfolio managers holding both spot and their futures to provide diversification or hedging, for security analysts to determine fair values of spot and futures and policy makers to arrange some rules and regulations in order to provide efficiency and liquidity in these markets. The remainder of this study is organized as follows. Section 2 gives a brief summary of literature. Section 3 describes the methodologies employed. Section 4 shows the data and the empirical results, and in Section 5 we draw our conclusions.

his paper examines the long-run relationship between the spot prices of index and currencies and their futures contracts by using weekly data from February 9, 2005 to October 17, 2012. The paper contributes to the growing literature of linkages between spot and futures prices by examining the long-run relationship between the spot and futures prices while most of the previous studies focus on the short-term interactions between them. In addition, while a considerable number of studies focus on the developed futures markets, this paper examine TDEX which is the highly growing futures markets in terms of its trading value. And more importantly while the previous studies do not considers the structural breaks, in this study we fill this gap by applying a cointegration methodology in the presence of structural breaks to test for a long-run relationship between spot and futures prices. Our results indicate the existence of structural breaks in our data and the estimated break dates are mostly clustered around the important economic and political events during the global financial turmoil which was triggered by the mortgage delinquencies6 after the mid of 2007. In addition, we find that the spot and future prices of the underlying assets including the ISE30 index, USD and EUR are cointegrated. Our results indicate that these markets have a long-run relationship under multiple structural breaks and the markets are efficient in the long-run. Further study might be on the estimation of the relationship between the prices of the futures and their underlying assets which are not examined in this paper. However, the results of these studies can be more valid only after these contracts will reach enough transaction volumes. In addition, the cointegration analysis considering the structural breaks might be used to examine the relationship between spot and futures markets of the other emerging economics.