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This study examines how the inception of IST30 Exchange Traded Funds on April 7, 2009 impacts the long term lead-lag relationship between ISE-30 spot and futures index markets in Turkey. Using detailed data from Borsa Istanbul, we form two periods before and after the introduction of IST30 ETF. First period includes 427 days before and second period includes 548 days after introduction of IST30 ETF. We used cointegration test, vector error correction model and Granger VECM tests to examine long term lead-lag relationship between spot and futures index markets before and after the inception of IST30 ETF. Consistent with our first hypothesis, we find long term lead-lag relationship and index futures lead spot index in both periods. This result is compatible with theoretical arguments of Subrahmanyam (1991) and Gorton and Pennacchi (1993)
This study examines how the inception of IST30 Exchange Traded Funds on April 7, 2009 impacts the long-term lead-lag relationship between ISE-30 spot and futures index markets in Turkey. Using detailed data from Borsa Istanbul, we form two periods before and after the introduction of IST30 ETF. The first period includes 427 days before and the second period includes 548 days after the introduction of the IST30 ETF. We used cointegration test, vector error correction model and Granger VECM tests to examine the long-term lead-lag relationship between spot and futures index markets before and after the inception of IST30 ETF. Consistent with our first hypothesis, we find long-term lead-lag relationship and index futures lead spot index in both periods. This result is compatible with theoretical arguments of Subrahmanyam (1991) and Gorton and Pennacchi (1993)
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