Recent empirical researches heavily discussed over the impact of derivatives trading on spot market in three aspects: efficient market hypothesis (EMH), lead-lag relationship and pattern of spot index volatility. This paper examines the impact of the introduction of stock index futures on the Stock Exchange of Thailand (SET) using daily data for period April 2003-April 2009. To test the efficient market hypothesis, cointegration analysis is used for this study. The lead-lag relationship is investigated through the error correction model and the impact on spot index volatility is detected by EGARCH model. The results found that there is long-run equilibrium for spot index and futures prices. This implies futures can be unbiased estimator for future spot price. The results also suggest that the direction of both long-and short-run causality is from spot prices to futures prices and the introduction of futures trading increases the conditional volatility of SET50 index.

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