Spot Market Volatility and Futures Trading: The Pitfalls of Using a Dummy Variable Approach
| Autor: | Bernd Wilfling, Jeanne Diesteldorf, Martin T. Bohl, Christian A. Salm |
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| Rok vydání: | 2015 |
| Předmět: |
Economics and Econometrics
050208 finance Stochastic volatility Financial economics 05 social sciences Implied volatility General Business Management and Accounting Volatility risk premium Accounting Volatility swap 0502 economics and business Forward volatility Economics Volatility smile 050207 economics Volatility (finance) Futures contract Finance |
| Zdroj: | Journal of Futures Markets. 36:30-45 |
| ISSN: | 0270-7314 |
| DOI: | 10.1002/fut.21723 |
| Popis: | This study challenges the existing literature examining the impact of the introduction of index futures trading on the volatility of its underlying. To overcome econometric shortcomings of previously published work using the dummy variable approach, we employ a Markov‐switching‐GARCH technique. This approach endogenously identifies distinct volatility regimes rather than modeling an exogenously defined one‐step change in the volatility process. We investigate stock market volatility in France, Germany, Japan, the United Kingdom, and the United States. Our empirical results indicate that index futures trading does neither stabilize nor destabilize the underlying spot market. © 2015 Wiley Periodicals, Inc. Jrl Fut Mark 36:30–45, 2016 |
| Databáze: | OpenAIRE |
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