The study is conducted to investigate the relationship of single stock futures with the spot price in Karachi Stock Exchange. Monthly data of twelve companies which are trading single stock futures have been examined for the period 1 January, 2005 to 31 December, 2010 with total of 72 observations for each company. Descriptive statistics, Unit Root test, Co-integration test, Granger Causality test, Vector Error Correction Model based on ARDL approach, Impulse Response and Variance Decomposition tests are used. The existence of long run relationship was found between the futures and spot prices of all the companies. The Granger Causality test reported that the spot prices of FFBL and LUCK assist in forecasting their respective futures prices. The futures prices of HUBC and POL forecast their respective spot prices and play its important role of price discovery. The impulse response analysis revealed that most of the shocks in the futures markets of all the selected companies are explained by their own innovations and their respective spot markets have less influence on them. Variance decomposition test reported that futures market is an exogenous market as majority of its stocks are explained by its own innovation. The results of VECM shows that in case of disequilibrium the adjustment process is quite fast for all the companie
KSE, VECM, ARDL
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Jamal, N., & Fraz, A. (2013). Relationship of single stock futures with the spot price: Evidence from Karachi Stock Exchange. Business Review, 8(1), 52-76. Retrieved from https://doi.org/10.54784/1990-6587.1216
March 02, 2021