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Article
Detecting risk transmission from futures to spot markets without data stationarity: Evidence from Turkey's markets
Journal of Risk Finance (2009)
  • Alper Ozun
  • Erman Erbaykal, Istanbul University
Abstract
Abstract: Purpose – The purpose of this paper is to analyze cointegration and causality relationships between spot and futures markets in Turkish foreign-exchange markets. Design/methodology/approach – The research employs Bounds cointegration test and Toda-Yamamoto causality test to detect a possible risk transmission between spot and futures markets. Time series of Turkish spot and futures foreign-exchange markets from January 2, 2006 to March 25, 2008 on a daily basis are used for empirical analysis. Findings – The empirical tests suggest that there is unidirectional causality running from future exchange-rate market to spot market implying that foreign-exchange markets have informational efficiency in Turkey. Originality/value – The paper has originality in both employing Bounds test and Toda-Yamamoto test to examine the relationship between spots and derivative markets, and in being one of the first empirical papers examining Turkish futures markets. In addition, the paper presents a guide on how Bounds and Toda-Yamamoto tests can be applied to detect interactions among markets without data stationarity.
Keywords
  • Emerging markets,
  • Foreign exchange,
  • Futures markets,
  • Risk analysis,
  • Turkey
Publication Date
Summer August, 2009
Citation Information
Alper Ozun and Erman Erbaykal. "Detecting risk transmission from futures to spot markets without data stationarity: Evidence from Turkey's markets" Journal of Risk Finance Vol. 10 Iss. 4 (2009)
Available at: http://works.bepress.com/alper_ozun/10/