현물지수와 선물지수에 대한 상대적 모멘텀강도 분석 = A Study on the Momentum Effect of Past Return on the Spot and Futures and Its Relative Strength

다국어 초록 (Multilingual Abstract)

This paper investigates the momentum effects of past rate of return on the spot and futures prices of KOSPI 200, respectively, and the relative strength of the momentum on these two price series. We analyze the differences between futures prices and its theoretical prices using daily spot and futures KOSPI 200 index from Jan. 2, 2004 to Dec. 30, 2009. We use two different samples, the near-the-month futures sample and the far-the- month futures sample. We find that the futures prices are, in general, lower than the theoretical prices and the undervaluation is larger in the far-the-month futures sample than in the near-the-month futures sample. We also find that the higher are the past rates of return, the larger are the undervaluation of futures prices relative to the theoretical prices. To our knowledge, for the first time, we document the momentum effect of past return on the spot is stronger than that on the futures. This finding is in contrast with the results of existent literatures, especially those on option market. Previous studies on options market report that prior spot return`s momentum effect on call option price is stronger than that on put option price. We provide a rationale that explains why the prior spot return`s momentum effect on the spot price is stronger than that on the futures price and why the futures price is undervalued relatively to its theoretical price. In this proposed rationale, arbitragers and short sale constraint on spot index play an important role in explaining our puzzling finding. Reasoning out the rationale, we divide the situation into the two cases. One is the case where the futures prices are higher than the theoretical prices and the other is the case where data are vice versa. We show that arbitrage activities, subsequent price adjustment of spot and futures, and short sale constraint on spot should lead to stronger momentum effect on the spot price relative to momentum on the futures price, which is consistent with our finding. We extend our analysis to testing the validity of our rationale after controlling for the short sale constraint on the spot. We regress the deviation of futures price from its theoretical price on the prior 60-day spot return, various short sale constraint variables and appropriate dummy variables. The regression model is inspired from the reverse regression suggested by Basu (1997). Not only the restriction on short sale but also variables such as trading volume, last period`s dividend, days to maturity are included in the model. Market maturity effect found by Stoll and Whaley (1990) is also considered. Evidence indicates that past spot return`s stronger momentum on the spot price compared to that on the futures price emerges, implying that arbitrage activities and subsequent change in spot and futures prices validate our proposed rationale in explaining our puzzling finding even after controlling for short sale constraints on the spot. Differences in relative momentum effect between the near-the-month and far-the-month futures samples are discussed.

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