The effects of futures market volume on spot market volatility
The effects of futures market volume on spot market volatility
There has been considerable interest, both academic and regulatory, in the hypothesis that the higher is the volume in the futures market, the greater is the destabilizing effect on the stock market. We show that conventional approaches, such as adding exogenous variables to GARCH models, may lead to false inferences in tests of this question. Using a stochastic volatility model, we show that, contrary to regulatory concern and the results of other papers, contemporaneous informationless futures market trading has no significant effect on spot market volatility.
futures markets, volume, stochastic volatility, equity market volatility, GARCH
799-819
Board, J.
3ee6543a-c316-41b4-b89a-0e761e0447ce
Sandmann, G.
df681b6a-d3fe-4ea3-b57b-1b2696d42375
Sutcliffe, C.
95f94790-b30c-428a-b1d4-4fc9d1555dfe
2001
Board, J.
3ee6543a-c316-41b4-b89a-0e761e0447ce
Sandmann, G.
df681b6a-d3fe-4ea3-b57b-1b2696d42375
Sutcliffe, C.
95f94790-b30c-428a-b1d4-4fc9d1555dfe
Board, J., Sandmann, G. and Sutcliffe, C.
(2001)
The effects of futures market volume on spot market volatility.
Journal of Business Finance & Accounting, 28 (7-8), .
Abstract
There has been considerable interest, both academic and regulatory, in the hypothesis that the higher is the volume in the futures market, the greater is the destabilizing effect on the stock market. We show that conventional approaches, such as adding exogenous variables to GARCH models, may lead to false inferences in tests of this question. Using a stochastic volatility model, we show that, contrary to regulatory concern and the results of other papers, contemporaneous informationless futures market trading has no significant effect on spot market volatility.
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Published date: 2001
Additional Information:
Sutcliffe, C., Board, J. and G. Sandmann
Keywords:
futures markets, volume, stochastic volatility, equity market volatility, GARCH
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Local EPrints ID: 35718
URI: http://eprints.soton.ac.uk/id/eprint/35718
ISSN: 0306-686X
PURE UUID: 9bd01285-cac9-4f22-b908-b6e4d31f4267
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Date deposited: 22 May 2006
Last modified: 26 Apr 2022 18:45
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Author:
J. Board
Author:
G. Sandmann
Author:
C. Sutcliffe
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