Author: Navin Agarwal
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
The Effect of Derivatives Trading on Stock Market Volatility an Empirical Analysis of Six Indices
Derivatives Trading and Spot Market Volatility
Author: David Cronin
Publisher:
ISBN:
Category : Foreign exchange futures
Languages : en
Pages : 56
Book Description
Publisher:
ISBN:
Category : Foreign exchange futures
Languages : en
Pages : 56
Book Description
Effect of Equity Index Futures Trading on Stock Market Volatility
Author: Suqin Gu
Publisher:
ISBN:
Category :
Languages : en
Pages : 28
Book Description
This paper investigates the effect of equity index futures trading on stock market volatility and provides the empirical evidence from the Chinese market. GARCH model variations are applied to analyze the change in conditional volatility of the underlying equity index after the introduction of futures trading. Both additive and multiplicative effects are considered in the GARCH study. Multiple market factors are also considered to control for other possible causes of volatility. The Stock-Watson “counterfactual VAR” method is adopted to decompose the source of volatility change. The evidence indicates that the introduction of CSI300 index futures trading does not significantly affect the conditional volatility of the underlying index. This finding is robust to different model specifications. The Stock-Watson test shows that there is no structural change following the introduction of futures trading. The only difference comes from the decreasing innovation variances.
Publisher:
ISBN:
Category :
Languages : en
Pages : 28
Book Description
This paper investigates the effect of equity index futures trading on stock market volatility and provides the empirical evidence from the Chinese market. GARCH model variations are applied to analyze the change in conditional volatility of the underlying equity index after the introduction of futures trading. Both additive and multiplicative effects are considered in the GARCH study. Multiple market factors are also considered to control for other possible causes of volatility. The Stock-Watson “counterfactual VAR” method is adopted to decompose the source of volatility change. The evidence indicates that the introduction of CSI300 index futures trading does not significantly affect the conditional volatility of the underlying index. This finding is robust to different model specifications. The Stock-Watson test shows that there is no structural change following the introduction of futures trading. The only difference comes from the decreasing innovation variances.
The Relation Between Futures Trading and Volatility in the Major Market Index
Author: Terrill Ray Keasler
Publisher:
ISBN:
Category : Stock index futures
Languages : en
Pages : 324
Book Description
Publisher:
ISBN:
Category : Stock index futures
Languages : en
Pages : 324
Book Description
The Effects of Stock Index Futures on Cash Market Volatility
The Relation Between Futures Trading and Volatility in the Major Market Index
Author: Terrill Ray Keasler
Publisher:
ISBN:
Category : Commodity futures
Languages : en
Pages : 162
Book Description
Publisher:
ISBN:
Category : Commodity futures
Languages : en
Pages : 162
Book Description
The Impact of Derivatives on Stock Market Volatility
Author: Saurabh Singh
Publisher:
ISBN:
Category :
Languages : en
Pages : 8
Book Description
One of the most important issues that have engaged the financial managers and the academicians in Finance all over the world is the financial markets volatility and the need to forecast it accurately. The stock prices depend on the investment behavior which, in turn, is affected by the efficiency of volatility forecasting. The purpose of this paper is to examine the volatility in the Indian stock market after the introduction of futures contracts on the SENSEX index. To explore the time series properties Unit Root Test and ARCH LM test have been employed. GARCH (1, 1) model have been applied to study the impact on underlying volatility, for this sample period of 26 years has been taken. The results of this study indicate that the introduction of futures leads to a significant change in the spot market volatility of the SENSEX index and it is successful in reducing the volatility.
Publisher:
ISBN:
Category :
Languages : en
Pages : 8
Book Description
One of the most important issues that have engaged the financial managers and the academicians in Finance all over the world is the financial markets volatility and the need to forecast it accurately. The stock prices depend on the investment behavior which, in turn, is affected by the efficiency of volatility forecasting. The purpose of this paper is to examine the volatility in the Indian stock market after the introduction of futures contracts on the SENSEX index. To explore the time series properties Unit Root Test and ARCH LM test have been employed. GARCH (1, 1) model have been applied to study the impact on underlying volatility, for this sample period of 26 years has been taken. The results of this study indicate that the introduction of futures leads to a significant change in the spot market volatility of the SENSEX index and it is successful in reducing the volatility.
The Effect of Futures Trading on Cash Market Volatility
Author: Gary Robinson
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
The stock market crash of October 1987 and the growing importance of index arbitrage and portfolio insurance helped to focus the attention of academics, practitioners and regulators on the possibly destabilising role of equity index futures on the underlying cash market. Although theoretical evidence on this question is somewhat ambiguous, empirical evidence, relating particularly to US markets, has been less equivocal: typically, no significant effect of futures trading has been found. This paper presents an analysis of daily stock price volatility on the London Stock Exchange for the period 1980-93. The measure of volatility produced is appropriate, given the distribution of returns and the time-varying nature of stock price volatility, and changes in monetary policy regime. The impact of futures on stock price volatility is measured within an augmented ARCH framework and the principal result is striking: rather than increasing volatility, index futures contracts are found to have reduced volatility significantly by around 17%.
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
The stock market crash of October 1987 and the growing importance of index arbitrage and portfolio insurance helped to focus the attention of academics, practitioners and regulators on the possibly destabilising role of equity index futures on the underlying cash market. Although theoretical evidence on this question is somewhat ambiguous, empirical evidence, relating particularly to US markets, has been less equivocal: typically, no significant effect of futures trading has been found. This paper presents an analysis of daily stock price volatility on the London Stock Exchange for the period 1980-93. The measure of volatility produced is appropriate, given the distribution of returns and the time-varying nature of stock price volatility, and changes in monetary policy regime. The impact of futures on stock price volatility is measured within an augmented ARCH framework and the principal result is striking: rather than increasing volatility, index futures contracts are found to have reduced volatility significantly by around 17%.
The Impact of Derivatives on Stock Market Volatility
Impact of Derivatives on the Volatility and Liquidity of the Underlying
Author: Saurabh Kumar
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
It has been almost one year since exchange-based option trading on individual stocks began in the Indian market. Considering that this is a structural change, it would be interesting to note its impact on the spot market. An analysis suggests that in certain stocks both volatility and returns in the spot market have declined after options trading began. Volumes in the spot market declined in most cases, post listing. Regulators and market participants have been interested in observing the impact of the listing of options on the spot market, especially in terms of volatility. For instance, the 1987 crash is widely blamed on the excessive use of financial derivatives. Therefore, a fundamental concern is whether speculation in the option market gives rise to higher volatility in the underlying asset market. Another concern among empirical researchers has been the effect of introduction of options on volumes. The options market provides an alternative arena for speculators. For instance, assuming that speculators move from the spot to the options markets, there could be a drop in traded volumes in the former, assuming that other demand factors do not change. An empirical study of the Indian stock markets to examine the effects of derivatives on the liquidity and volatility of the underlying asset over the period of the last twelve months suggests that there is nothing to support the theory that the introduction of options has led to a rise in trading interest in the spot market.
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
It has been almost one year since exchange-based option trading on individual stocks began in the Indian market. Considering that this is a structural change, it would be interesting to note its impact on the spot market. An analysis suggests that in certain stocks both volatility and returns in the spot market have declined after options trading began. Volumes in the spot market declined in most cases, post listing. Regulators and market participants have been interested in observing the impact of the listing of options on the spot market, especially in terms of volatility. For instance, the 1987 crash is widely blamed on the excessive use of financial derivatives. Therefore, a fundamental concern is whether speculation in the option market gives rise to higher volatility in the underlying asset market. Another concern among empirical researchers has been the effect of introduction of options on volumes. The options market provides an alternative arena for speculators. For instance, assuming that speculators move from the spot to the options markets, there could be a drop in traded volumes in the former, assuming that other demand factors do not change. An empirical study of the Indian stock markets to examine the effects of derivatives on the liquidity and volatility of the underlying asset over the period of the last twelve months suggests that there is nothing to support the theory that the introduction of options has led to a rise in trading interest in the spot market.