Margin Changes and Futures Trading Activity: A New Approach

27 Pages Posted: 29 Jan 2013

See all articles by Kate Phylaktis

Kate Phylaktis

City University London - Sir John Cass Business School

Antonis A. Aristidou

City University London - Sir John Cass Business School

Multiple version iconThere are 2 versions of this paper

Date Written: January 2013

Abstract

In this paper we examine the impact of margins, adjusted for underlying price risk proxied by market volatility, on trading volume and incorporate the relationship between trading volume and price volatility documented in stock markets. We estimate a bivariate GARCH‐M model to take account of the inter‐relationships and apply them to the Greek derivatives market over the period 1999–2005. The results show that when adjusting margins for market risk there is no impact on trading volume, casting doubts on the results of previous research, and providing support for the view that margin requirements are used only as a mechanism to prevent trader default.

Keywords: margin requirements, financial market volatility‐volume, Athens Stock Exchange

JEL Classification: G1, G14, G18

Suggested Citation

Phylaktis, Kate and Aristidou, Antonis A., Margin Changes and Futures Trading Activity: A New Approach (January 2013). European Financial Management, Vol. 19, Issue 1, pp. 45-71, 2013. Available at SSRN: https://ssrn.com/abstract=2208333 or http://dx.doi.org/10.1111/j.1468-036X.2012.00565.x

Kate Phylaktis (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 70408735 (Phone)
+44 20 70408881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/k.phylaktis/

Antonis A. Aristidou

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

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