Index Futures Activity and Stock Market Volatility: An Empirical Analysis of the Italian Stock Exchange
Bank of Italy
Giornale Degli Economisti, Vol. 59, Issue 1, pp. 51-88, 2000
This paper examines the impact of MIB30 Index Futures on the volatility of the Italian Stock Exchange. The results suggest that the onset of futures trading may have led to diminished daily volatility. They also suggest that the nature of the volatility itself has not changed between the pre-futures and post-futures periods although a lower volatility is found in the latter. Further, the results point out that lagged futures volume is inversely related to stock market conditional volatility. These findings are consistent with those theories stating that active and developed futures markets enhance the efficiency of the corresponding spot markets.
Keywords: futures, volatility, efficiency, GARCH, derivatives, Italian stock exchange, stock exchange
JEL Classification: G1, G14, G15, G18, G2Accepted Paper Series
Date posted: March 16, 2012
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