Index futures trading, information and stock market volatility: the case of Greece

Christos Floros, D. Vougas

    Research output: Contribution to journalArticlepeer-review

    Abstract

    This paper examines the effect of futures trading on the volatility of the underlying spot market. It focuses on various techniques to investigate the relationship between information and the volatility of the FTSE/ASE-20 and FTSE/ASE Mid 40 indices in Greece. The results for the FTSE/ASE-20 index suggest that futures trading has led to decreased stock market volatility (negative effect), but the results for the FTSE/ASE Mid 40 index indicate that the introduction of stock index futures has led to increased volatility (positive effect), while the estimations of the unconditional variances indicate lower market volatility after the introduction of stock index futures. Furthermore, the results show that good news has a more rapidly impact on FTSE/ASE-20 stock return volatility. For the FTSE/ASE Mid 40 index, the results suggest that news is reflected in prices more slowly, while old news has a less persistent effect on prices. These findings are helpful to financial managers dealing with Greek stock index futures.
    Original languageEnglish
    Pages (from-to)146-166
    Number of pages21
    JournalDerivatives Use, Trading Regulation
    Volume12
    Issue number1
    DOIs
    Publication statusPublished - May 2006

    Cite this