Price discovery and information transmission across stock index futures: Evidence from VN 30 Index Futures on Vietnam’s stock market

• Main Authors: Nguyễn, Thị Nhung, Trần, Thị Vân Anh, Nguyễn, Tố Nga, Vương, Thùy Linh
• Other Authors: YSI Asia Convening 2019
• Format: Conference or Workshop Item
• Language: English
• Published: H. : ĐHKT 2020
• Subjects: VN30 Index Futures; Price discovery; Information transmission; Spot Futures Interlinkages; Vector Error Correction Model (VECM); Emerging Market
• Online Access: http://repository.vnu.edu.vn/handle/VNU_123/70843
• Institution: Vietnam National University, Hanoi

The introduction of the first tradable stock index futures of VN 30 is a very good signal showing that Vietnam is starting to have a high-level financial market, which brings many expectations about sustainable and safe development of stock market. However, risk conerns of this type of derivative products have been raising with many claims since then. This article aims to provide empirical evidences to show if futures trading plays the very important role of price discovery and information transmission for spot market Using daily data collected about VN30 Index Futures, VN30 Index, VN-Index from August 10, 2017 to February 28, 2019 that is divided into 3 sub-periods (Increase/Decrease/Recovery), the research verifies VN30 Index Futures’ role of price discovery and information transmission by applying Vector Error Correction Model (VECM). Empirical findings show that there is a stable equilibrium relationship between the two series groups (including VN30 Index Futures, VN30 Index and VN30 Index Futures and VN-Index) during 3 sub-periods or spot and futures markets are integrated and synchronized. In particular, VN30 Index Futures’ price discovery and information transmission is clearly seen when the market falls or doesn’t change a lot.