Growing Pains: The Evolution of New Stock Index Futures in Emerging Markets

Research in International Business and Finance, May 2016, v.37, pp. 1-16. DOI:10.1016/j.ribaf.2015.10.004

Posted: 9 Jul 2020

See all articles by Nazli Sila Alan

Nazli Sila Alan

Fairfield University - Charles F. Dolan School of Business

Ahmet K Karagozoglu

Hofstra University, Zarb School of Business; New York University (NYU) - Volatility and Risk Institute

Sibel Korkmaz

AIG

Date Written: 2016

Abstract

Analyzing the first seven years of trading in Turkish stock index futures (BIST 30) and contrasting that to the progress of Korean (KOSPI 200) and Taiwanese (TAIEX) markets, we find that BIST 30 initially experiences a persistent mispricing and speculative trading similar to KOSPI 200 but it also experiences the largest increase in hedge effectiveness, becoming hedger-dominated similar to TAIEX. Most significantly, we demonstrate that spot market short-sell quote volume is a good measure of short-sale constraints and a significant determinant of mispricing in BIST 30. A methodological contribution of this paper is a four-equation multivariate VAR framework to analyze the volatility impact of futures.

Keywords: index futures, mispricing, price discovery, volatility, hedging effectiveness

JEL Classification: G11, G13, G19

Suggested Citation

Alan, Nazli Sila and Karagozoglu, Ahmet K and Korkmaz, Sibel, Growing Pains: The Evolution of New Stock Index Futures in Emerging Markets (2016). Research in International Business and Finance, May 2016, v.37, pp. 1-16. DOI:10.1016/j.ribaf.2015.10.004, Available at SSRN: https://ssrn.com/abstract=3628749

Nazli Sila Alan

Fairfield University - Charles F. Dolan School of Business ( email )

N. Benson Road
Fairfield, CT 06824
United States

Ahmet K Karagozoglu (Contact Author)

Hofstra University, Zarb School of Business ( email )

Department of Finance
148 Hofstra University
Hempstead, NY 11549-1480
United States
(516) 463-5701 (Phone)
(718) 701-8331 (Fax)

HOME PAGE: http://sites.hofstra.edu/ahmet-karagozoglu

New York University (NYU) - Volatility and Risk Institute ( email )

44 West 4th Street
New York, NY 10012
United States

Sibel Korkmaz

AIG

1 Financial Square
New York, NY 10005
United States

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