The Relationship Between Futures Contracts

Abstract

This study examined the impact of futures contract changes on the benchmark indicators of the same financial instrument for daily data for the period from March 2, 2025, to May 16, 2025. The nature of this relationship was revealed by relying on the time series cointegration and error correction model (ECM), the MODWT model, and the multivariate GARCH model. A long-term relationship was revealed between futures contract returns and the benchmark index. The ECM results show that all variables are endogenous, meaning they are quickly affected by external variables. As for the MODWT model, the results showed a strong relationship between futures contract returns and the benchmark index returns. This is an expected result in light of the economic and financial reforms witnessed by the Kingdom of Saudi Arabia in the context of its path to achieving "Vision 2030," which has provided a strong foundation for financial market dynamism.