Stock Index Futures And Spot Trading In The Taiwan Region, Interaction Between Analysis

Most researches of TAIEX and TAIFEX in literatures, seldom took the different time trend into consideration. This paper aims to study the lead-lag relationship between TAIEX and TAIFEX in different time trend. In accordance to the judgments of bull and bear markets (Fabozzi and Francis Zumwalt,1977; Kim and Zumwalt, 1979),4 sections are divided and selected:bull market, bear market, bull-bear reversal and bear-bull reversal. Cointegration test, Vector Error Correction model, Granger Causality test, Impulse Response Function and Forecasting Error Variance Decomposition are used to study the lead-lag relationship between TAIEX and TAIFEX in bull and bear markets.The empirical results are as follows:1. In the bull market, TAIEX is leading in the short term.TAIFEX is leading when long-term equilibrium is achieved, representing TAIFEX discover price well in the long term.2. In the bear market, no matter in the long term or in the short term, TAIFEX is always leading, which means more information is passed to the TAIEX market from the TAIFEX market.3. In bull-bear reversal,TAIEX lead in the short term while TAIEX and TAIFEX lead in turn when achieving long-term equilibrium but TAIEX has larger amplitude.4. In bear-bull reversal, there is no clear lead-lag relationship between TAIEX and TAIFEX, while TAIEX and TAIFEX lead in turn when achieving long-term equilibrium but TAIEX has larger amplitude.