New insights into the impact of the introduction of futures trading on stock price volatility
We examine whether, and to what extent, the introduction of trading in share futures contracts on individual stocks (i.e., individual share futures, or ISFs) has impacted on the systematic risk and volatility of the underlying shares. The use of ISFs allows a unique experimental design that complements existing work on index futures. Our major findings are as follows. First, we found a general reduction in systematic risk on individual stocks after the listing of futures. Second, we found evidence of a decline in unconditional volatility. Third, we found mixed evidence concerning the impact on conditional volatility. Fourth, the introduction of futures was found to impact on the market dynamics, as reflected by a change in the asymmetric volatility response, although the direction of that change is stock‐specific. In general, the results point to a number of features that are case‐specific and provide new insights into the mixed results that are typical of existing studies. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:237–255, 2001
Year of publication: |
2001
|
---|---|
Authors: | McKenzie, Michael D. ; Brailsford, Timothy J. ; Faff, Robert W. |
Published in: |
Journal of Futures Markets. - John Wiley & Sons, Ltd.. - Vol. 21.2001, 3, p. 237-255
|
Publisher: |
John Wiley & Sons, Ltd. |
Saved in:
freely available
Saved in favorites
Similar items by person
-
New insights into the impact of the introduction of futures trading on stock price volatility
McKenzie, Michael D., (2001)
-
New Insights into the Impact of the Introduction of Futures Trading on Stock Price Volatility
McKenzie, Michael D., (2001)
-
An evaluation of volatility forecasting techniques
Brailsford, Timothy J., (1994)
- More ...