An alternative approach in investigating lead-lag relationships between stock and stock index futures markets - comment

This study re-examines and reinterprets the empirical results of Brooks et al. (1999) which investigated the lead-lag relationship between stock indices and stock index futures markets. Contrary to the contention of Brooks et al. that the stock index futures market leads the stock market, it is found that their linear Granger causality tests exhibit overwhelming evidence of a contemporaneous relationship and a bidirectional relationship between spot and futures returns. The interpretation of the empirical evidence of Brooks et al., although different from theirs, is equally supportive of the theoretical predictions of the cost-of-carry model and the efficient market hypothesis.