Stock Index Futures Trading and Spot Market Volatility PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Stock Index Futures Trading and Spot Market Volatility PDF full book. Access full book title Stock Index Futures Trading and Spot Market Volatility by George Karathanassis. Download full books in PDF and EPUB format.
Author: George Karathanassis Publisher: ISBN: Category : Languages : en Pages : 21
Book Description
This paper investigates possible spill-over effects on the Spot Market due to the initiation of Futures contracts. According to many analysts there still exists a puzzle regarding the stabilization or destabilization effects of futures contracts. Although the speculative forces (uninformed investors) tend to destabilize the market, rational hedging strategies and the transition of risk allow for stabilization shift. In order to investigate this issue, many researchers during the last decade, have utilized the GARCH framework enriched to capture many stylized financial features, such as the asymmetric response to news and leptokurtosis. However, in this paper the GARCH framework is extended to allow for skewness in the return's distribution and to examine the timing of possible structural changes, while the conditional mean of the process is adjusted to account for time-varying risk premia and for the day of the week effects decomposition. Furthermore, the distinguishing feature of this paper is the SWARCH econometric model, which enables a dynamic regime shifting through a Markov Chain transition matrix. According to the empirical findings on the FTSE-20/ASE futures contract, there exists a significant stabilization effect on the long run, while in the short run this seems to be non-robust.
Author: George Karathanassis Publisher: ISBN: Category : Languages : en Pages : 21
Book Description
This paper investigates possible spill-over effects on the Spot Market due to the initiation of Futures contracts. According to many analysts there still exists a puzzle regarding the stabilization or destabilization effects of futures contracts. Although the speculative forces (uninformed investors) tend to destabilize the market, rational hedging strategies and the transition of risk allow for stabilization shift. In order to investigate this issue, many researchers during the last decade, have utilized the GARCH framework enriched to capture many stylized financial features, such as the asymmetric response to news and leptokurtosis. However, in this paper the GARCH framework is extended to allow for skewness in the return's distribution and to examine the timing of possible structural changes, while the conditional mean of the process is adjusted to account for time-varying risk premia and for the day of the week effects decomposition. Furthermore, the distinguishing feature of this paper is the SWARCH econometric model, which enables a dynamic regime shifting through a Markov Chain transition matrix. According to the empirical findings on the FTSE-20/ASE futures contract, there exists a significant stabilization effect on the long run, while in the short run this seems to be non-robust.
Author: Kiran Publisher: ISBN: Category : Languages : en Pages :
Book Description
Studies on the impact of futures introduction on the volatility of the underlying index report no increase in the spot volatility after the futures introduction. However, the prior studies do not comment on how exactly the information transmits from the futures market to the spot market. This paper focuses on investigating whether the change in the structure of spot volatility evolution process is due to the futures trading activity. The relation between the Futures trading activity (measured through trading volume and open interest) and spot index volatility is documented, following Bessembinder and Seguin (1992), by partitioning trading activity into expected and shock components by an appropriate ARMA model. The series are then appended in the variance equation through an appropriate ARMA-GARCH model, following Gulen and Mayhew (2000). Further, the study examines the effect of the Sept. 11th terrorist attack has had on the Nifty spot-futures relation.The study concludes that post the Sept. 11th attack, the relation between Futures Trading Activity and Spot volatility has strengthened, implying that the market has become more efficient in assimilating the information into its prices. This is evident in both volume and open interest (expected and activity shock) being significant post Sept. 11 while not being significant pre Sept. 11.
Author: Neha Deo Publisher: ISBN: Category : Languages : en Pages : 19
Book Description
This paper applies GARCH models to ascertain the impact of index futures trading on the volatility of the spot market. Specifically, the research aims to determine whether the introduction of index futures trading increases or decreases the level of volatility within the underlying spot market. In addition, the research verifies the sensitivity of price to information as well as the impact the leverage effect may have on the degree and structure of volatility. As Australia is a commodity driven economy, resources constitute one of the largest economic sectors. Following from this, the daily closing price of the ASX 200 Resources Index for the period 2010 to 2016 was therefore used in the analysis. Given that 14 October 2013 was when the Australian Securities Exchange launched the ASX 200 Resources Index futures, investigating the volatility prior to and after this date is also a focus of the paper. The results of the study suggest that the introduction of index futures did not substantially increase the level of volatility in the spot market but found that there is an increase in sensitivity to historical information; and that a negative leverage effect exists within the Resources Index. Since the Australian share market operates within a dynamic financial landscape, the study adopts a framework that seeks to provide behavioural and macroeconomic explanations for the findings, where appropriate.
Author: Hun Y. Park Publisher: ISBN: Category : Prices Languages : en Pages : 56
Book Description
This paper compares the volatility of spot prices (dealership market) with that of futures prices (auction market) to test the implications of different trading mechanisms for the volatility of prices. First, a natural estimator of the volatility is sued. Using the intraday data of the major Market Index and its futures prices, we show that the volatility of opening prices is higher than that of closing prices not only in the spot market but in the futures market, and that the intraday volatility patterns are U-shaped in both markets. Of particular interest is that futures prices do not appear to be as volatile as spot prices when the natural estimator of volatility is used, to the contrary of the conventional wisdom. We argue that the different volatility patterns during the day are not necessarily due to the different trading mechanisms, auction market versus dealership market. Instead, after developing a simple theoretical model of speculative prices, we show that at least part of the different volatility patterns during the day may be attributable to speculative behavior of investors based on heterogeneous information. In addition, we further investigate the volatilities of spot and futures prices using a temporal estimator of price volatility as an alternative to the natural estimator. Based on the temporal estimator, we cannot find any systematic pattern of volatilities during the day in both spot and futures markets, and that futures prices appear to be more volatile than spot prices in terms of how quickly the price moves beyond a given unit price level, but not in terms of how much the price changes during a given unit time interval. Some policy implications are also discussed.
Author: Charles M.S. Sutcliffe Publisher: Routledge ISBN: 1351148540 Category : Business & Economics Languages : en Pages : 844
Book Description
The global value of trading in index futures is about $20 trillion per year and rising and for many countries the value traded is similar to that traded on their stock markets. This book describes how index futures markets work and clearly summarises the substantial body of international empirical evidence relating to these markets. Using the concepts and tools of finance, the book also provides a comprehensive description of the economic forces that underlie trading in index futures. Stock Index Futures 3/e contains many teaching and learning aids including numerous examples, a glossary, essay questions, comprehensive references, and a detailed subject index. Written primarily for advanced undergraduate and postgraduate students, this text will also be useful to researchers and market participants who want to gain a better understanding of these markets.
Author: United States. Congress. House. Committee on Agriculture. Subcommittee on Conservation, Credit, and Rural Development Publisher: ISBN: Category : Stock exchanges Languages : en Pages : 104
Author: George Karathanassis
Author: George Karathanassis
Author: Kiran
Author: Neha Deo
Author: Ebru Çaġlayan
Author: Hun Y. Park
Author: Hendrik Bessembinder
Author: David Cronin
Author: Charles M.S. Sutcliffe
Author: United States. Congress. House. Committee on Agriculture. Subcommittee on Conservation, Credit, and Rural Development
Author: Eric C. Chang