REGULATORY CHANGE AND COINTEGRATION BETWEEN THAI SPOT AND FUTURES STOCK INDICES

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Thanarerk Thanakijsombat
Treerapot Kongtoranin
Worapong Joungrattanakamjorn

Abstract

This study investigates the dynamics of the short-term and cointegrating relationships between SET50 index and SET50 Futures prices from 2011 – 2017, in order to examine the impacts of the change of TFEX regulation in 2014 on the market efficiency and the predictive role of both data. The findings show that the regulatory change causes both markets to be more cointegrated as revealed by a faster speed of adjustement toward their long-run equilibrium. SET50 Index Futures price is found to perform better as a leading indicator of SET50 as a result of the regulatory adjustment. 

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