Download or read book The Impact of New Index Construction on Lead-Lag Relationship Between Futures and Spot Markets written by Wai-Siang Tan and published by . This book was released on 2015 with total page 1 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses linear and nonlinear Granger causality tests to study the lead-lag relationship between FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) and Kuala Lumpur Composite Index Futures (FKLI). We apply a new nonparametric test for Granger causality test by Diks and Panchenko (2006) and linear Granger causality test on the daily return time series. Both tests provide evidence of bi-directional Granger causality relations between cash and futures market before and after implementation of the new index. However, the evidence shows that since the implementation of new index in which number of constituents reduces from 100 to 30 and change in the calculation methodology and rule, the effect of cash market lead futures market has increased.