Modeling International Price Relationships and Interdependencies between EU Stock Index and Stock Index Futures Markets: A Multivariate Analysis

27 Pages Posted: 4 Apr 2001

See all articles by Gioia Pescetto

Gioia Pescetto

University of Portsmouth

Antonios Antoniou

Wealth Associates

Antonis Violaris

Durham University - Department of Economics and Finance

Date Written: January 2001

Abstract

Over the past fifteen years, financial markets have become increasingly global. The gradual dismantling of regulatory barriers and the introduction of more advanced technology, particularly in data processing and telecommunications, have called for new market structures and practices. Asset and liability management has increasingly become a globally integrated function and the issuance of international securities is often used as a substitute for more traditional funding channels. These developments are to be welcomed in so far as the increased level of competition is expected to lead to a more efficient allocation of capital, both nationally and internationally, lower-cost financial services and new means of hedging risk. However, they also present a new regulatory challenge in securing financial stability. It was the 1987 world-wide stock market crash in particular which highlighted the inadequacies of a regulatory framework still largely based on old institutional divisions and national jurisdictions. In the globalized security markets, the main challenge for both investors and policy makers is to take advantage of and promote efficiency enhancing aspects of market interaction, while containing and controlling the undesirable destabilising effects.

Keywords: spot-futures, market interdependence, lead-lags, volatility, VAR-EGARCH, EU financial markets

JEL Classification: G1

Suggested Citation

Pescetto, Gioia Maria Rita and Antoniou, Antonios and Violaris, Antonis, Modeling International Price Relationships and Interdependencies between EU Stock Index and Stock Index Futures Markets: A Multivariate Analysis (January 2001). EFMA 2001 Lugano Meetings. Available at SSRN: https://ssrn.com/abstract=264591 or http://dx.doi.org/10.2139/ssrn.264591

Gioia Maria Rita Pescetto (Contact Author)

University of Portsmouth ( email )

Richmond Building
Portland Street
Portsmouth, Hampshire PO1 3DE
United Kingdom
+44(0)2392844057 (Phone)
+44(0)2392844059 (Fax)

Antonios Antoniou

Wealth Associates ( email )

Alpine House,
Honeypot Lane
London, NW9 9RX
United Kingdom

Antonis Violaris

Durham University - Department of Economics and Finance

Centre for Empirical Research in Finance (CERF) 23-26 Old Elvet
Durham DH1 3HY
United Kingdom

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