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Dynamic spillover effects in futures markets: UK and US evidence

Dynamic spillover effects in futures markets: UK and US evidence
Dynamic spillover effects in futures markets: UK and US evidence
Previous studies on spillover effects in future markets have so far confined themselves to static analyses. In this study, we use a newly introduced spillover index to examine dynamic spillovers between spot and futures market volatility, volume of futures trading and open interest in the UK and the US. Based on a dataset over the period February 25, 2008 to March 14, 2013, that encompasses both the global financial crisis and the Eurozone debt crisis, we find that spot and futures volatilities in the UK (US) are net receivers (net transmitters) of shocks to volume of futures trading and open interest. The analysis also sheds light on the dynamic interdependence of spot and futures market volatilities between the US and the UK. Specifically, the spot and futures volatility spillovers between the UK and US markets are of bidirectional nature, however, they are affected by major economic events such as the global financial and Eurozone debt crisis. Several robustness checks endorse our main findings. Overall, these results have important implications for various market participants and financial sector regulators.
Spot and futures market, Volatility, Volume, Open interest, Spillovers
1057-5219
406-418
Antonakakis, Nikolaos
6209c7e2-ea9d-437d-a215-93b5c11a502a
Floros, Christos
c4c6c62c-8719-4688-b3d2-d46fd01581dc
Kizys, Renatas
9d3a6c5f-075a-44f9-a1de-32315b821978
Antonakakis, Nikolaos
6209c7e2-ea9d-437d-a215-93b5c11a502a
Floros, Christos
c4c6c62c-8719-4688-b3d2-d46fd01581dc
Kizys, Renatas
9d3a6c5f-075a-44f9-a1de-32315b821978

Antonakakis, Nikolaos, Floros, Christos and Kizys, Renatas (2016) Dynamic spillover effects in futures markets: UK and US evidence. International Review of Financial Analysis, 48, 406-418. (doi:10.1016/j.irfa.2015.03.008).

Record type: Article

Abstract

Previous studies on spillover effects in future markets have so far confined themselves to static analyses. In this study, we use a newly introduced spillover index to examine dynamic spillovers between spot and futures market volatility, volume of futures trading and open interest in the UK and the US. Based on a dataset over the period February 25, 2008 to March 14, 2013, that encompasses both the global financial crisis and the Eurozone debt crisis, we find that spot and futures volatilities in the UK (US) are net receivers (net transmitters) of shocks to volume of futures trading and open interest. The analysis also sheds light on the dynamic interdependence of spot and futures market volatilities between the US and the UK. Specifically, the spot and futures volatility spillovers between the UK and US markets are of bidirectional nature, however, they are affected by major economic events such as the global financial and Eurozone debt crisis. Several robustness checks endorse our main findings. Overall, these results have important implications for various market participants and financial sector regulators.

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ANTONAKAKIS_2015_cright_IRFA_Dynamic_Spillovers_effects_in_Future_Markets - Accepted Manuscript
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More information

Accepted/In Press date: 1 March 2015
e-pub ahead of print date: 12 March 2015
Published date: December 2016
Keywords: Spot and futures market, Volatility, Volume, Open interest, Spillovers

Identifiers

Local EPrints ID: 434024
URI: http://eprints.soton.ac.uk/id/eprint/434024
ISSN: 1057-5219
PURE UUID: 38b7b323-02dd-4536-b80c-3acc8f403e60

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Date deposited: 11 Sep 2019 16:30
Last modified: 16 Dec 2019 17:32

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