Spot Market Volatility and Futures Trading: The Pitfalls of Using a Dummy Variable Approach
Zusammenfassung
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.
Zitieren als
Bohl, M., Diesteldorf, J., Salm, C., & Wilfling, B. (2016). Spot Market Volatility and Futures Trading: The Pitfalls of Using a Dummy Variable Approach. Journal of Futures Markets, 36(1), 30–45.Details
Publikationstyp
Forschungsartikel (Zeitschrift)
Begutachtet
Ja
Publikationsstatus
Veröffentlicht
Jahr
2016
Fachzeitschrift
Journal of Futures Markets
Band
36
Ausgabe
1
Erste Seite
30
Letzte Seite
45
Sprache
Englisch
ISSN
0270-7314
DOI