SPECULATIVE EFFICIENCY OF STOCK INDEX FUTURES MARKETS: AN ANALYSIS ON THE ASEAN MARKETS

Abstract

The capital markets in emerging economies are undergoing rapid transformation due to the advancement of technological innovations and globalization of the marketplace. Thus, the risk management measures are extremely important throughout the financial system. However, the scarcity of derivative instruments such as futures and options in emerging markets, in addition to the failure to generate liquidity, have made the emerging economies to be left behind in the recent development of the world capital markets. While there are a great number of earlier studies that analyse the efficiency of futures markets in different countries, there is a lack of research that take into account of the speculative efficiency of futures markets which argues that futures prices are an unbiased forecast of the spot prices as well as a crucial part of forecasting techniques. This paper aims to investigate the speculative efficiency of stock index futures markets in the ASEAN markets which comprises of Singapore, Malaysia and Thailand by employing an econometric time series data analysis ranging from January 2000 to December 2010.