ABSTRACT
This chapter explains the existence of lead–lag relationships in the Nikkei stock index futures markets. It analyzes whether such a relationship exists between the stock market and each of the Nikkei futures markets. The chapter examines to what extent it is influenced by the creation of new futures contracts and by regulatory differences. The Nikkei-225 index consists of 225 stocks listed on the First Section of the Tokyo Stock Exchange. The Nikkei case is unique in that the different contracts, although written on the same underlying index, are trading in very different market environments. The chapter examines the lead–lag relationship between the Nikkei Stock Average (NSA) futures markets and the underlying stock market. The positive influence of volume is illustrated in the stronger lead of Osaka Securities Exchange, the dominant NSA futures market in terms of volume, and in the increased lead of Singapore International Monetary Exchange in the second period that sees a significant rise in volume.
